Navigating the 2025 UK Tax Changes: What You Need to Know

UK tax changes 2025

As we approach 2025, several notable changes to the UK’s tax landscape are on the horizon. These updates are designed to address economic and environmental challenges, but they will also have a direct impact on taxpayers and businesses. Here’s a comprehensive overview of the upcoming changes:

Vehicle Excise Duty (VED) for Electric Vehicles

One of the most significant changes is the new VED rules for electric vehicles (EVs). Starting in April 2025, EVs will no longer be exempt from VED. Here’s what you need to know:

  • First-Year VED: New EVs will be required to pay a first-year rate of £10.
  • Expensive Car Supplement: EVs priced over £40,000 will be subject to the Expensive Car Supplement, adding an extra cost burden for high-end EV buyers.

VED for Petrol and Diesel Cars

Drivers of petrol and diesel cars will also face increased VED rates:

  • First-Year VED Rates: For example, a new Ford Puma’s first-year VED rate will jump from £220 to £440, marking a substantial rise in the cost of purchasing new petrol or diesel vehicles.

Benefit in Kind (BiK) Tax Rates

Benefit in Kind tax rates are also set to rise, impacting both employers and employees:

  • 1% Increase Across All Tax Brackets: From April 2025, BiK rates will increase by 1% across all brackets.
  • Fully Electric Cars: Even zero-emission vehicles will see a BiK rate increase from 2% to 3%.

Class 1 National Insurance Contributions (NICs)

Changes to NICs are also on the agenda:

  • Secondary Class 1 NICs Rate: The rate will rise from 13.8% to 15% from April 2025.
  • Secondary Threshold: The threshold will be reduced from £9,100 to £5,000, affecting employers’ NICs obligations.

Employment Allowance

There’s good news for small businesses regarding the Employment Allowance:

  • Increased Maximum Allowance: The maximum allowance will increase from £5,000 to £10,500.
  • Restriction Removal: The restriction on employers who have incurred a secondary Class 1 NICs liability of more than £100,000 will be removed, allowing more businesses to benefit from the allowance.

Navigating the Changes

These changes are part of a broader effort to balance economic needs with environmental considerations. For taxpayers and businesses alike, it’s crucial to stay informed and plan accordingly to mitigate the impact of these changes.

As always, consulting with a tax professional or financial advisor can provide personalised advice tailored to your specific circumstances.

Stay ahead of the curve and ensure you’re prepared for the new tax landscape in 2025.

Feel free to share this blog with others who might find it helpful, and let’s navigate these changes together. If you have any specific questions or need more detailed information, don’t hesitate to reach out!