Happy new tax year! Tax-related changes that could affect you

Now that tax year 2024-25 is behind us and your new tax year allowances have reset, it’s important to understand what’s changed and how this could affect your individual circumstances.

In this article, we’ll outline some of the changes the government has made to its tax regime and explain how they could impact you.

Beware of ISA changes

Even though the government didn’t announce changes to individual savings allowances (ISAs) to come into effect this tax year, it confirmed that it is considering a reform of the ISA regime. There is some speculation about a potential reduction of the subscription allowance for Cash ISAs.

Your £20,000 tax-free allowance remains in place for tax year 2025-26, as a UK tax resident. But a potential reform on the horizon heightens the importance of making use of this allowance the best you can.

Hike in employers’ national insurance contributions

Starting 6 April, National Insurance contributions (NICs) increased to 15% from 13.8% the previous tax year.

In addition, the secondary threshold – meaning the point at which employers must pay NICs – has gone down from £9,100 to £5,000.

These changes will put upwards pressure on staffing costs for business owners, and lead to difficult decisions such as restructurings, pay or bonus freezes, or a re-evaluation of recruitment plans.

Similarly, this hike is likely to impact individuals who act as employers. For instance, families who act as employers for the purposes of childcare (nannies or au pairs) could also feel an uptick in costs. For a family paying an annual salary of £50,000 per year to someone for private childcare, NICs costs have risen by £1,104.65 in the new tax year compared with last year.

Regardless of whether this increase might make a difference in your annual spending and costs, it provides a timely opportunity to think about gifting. If a member of your family undertakes any private childcare, gifting them money to cover the costs could be a welcome and opportune gesture. And remember, you’re allowed to gift up to £3,000 per tax year without  the value of your gifts becoming part of your estate (and being included in your inheritance tax calculations)!

Capital gains tax changes

From a capital gains tax (CGT) perspective, the good news is the annual allowance of £3,000 (your gains before starting to pay tax on them) hasn’t changed. The not-so-good news is that the rate of CGT has gone up from 20% to 24%, for higher rate and additional rate tax payers, and up from 10% to 18% for basic rate taxpayers. These measures took effect when Chancellor Rachel Reeves announced the Autum Budget, on 30 October last year.

Individuals should consider the best way of selling assets as part of their tax optimisation strategies. And because CGT is an extremely complicated tax, we recommend you seek financial advice to ensure you’re selling your assets in the most tax-efficient way.

Renting a holiday home? Prepare for higher rent prices

The Labour government has also been making it extremely clear that it wants individuals to buy property instead of renting, making it more costly for individuals to hold multiple properties as part of their estate.

From 1 April, individuals renting out a furnished holiday home no longer benefit from preferential tax treatment compared with residential rental properties. This means holiday homeowners no longer receive tax relief on chargeable gains for trading business assets.

Time to plan

Even though the new tax year has just begun, it’s never too early to start planning. In our experience, having a conversation about financial planning can have a significant impact on individuals – and most are looking for reassurance that they’re on track to live the retirement of their dreams. A conversation can achieve that.

If you have any questions, or indeed would simply like to check whether you’re on the right track with your finances, talk to us.