11 tax and bill rises coming in 2025 - from alcohol and cigarettes to TV

UK households face 11 bill rises in 2025. The first begins on January 1, New Year's Day just after Christmas, with the new Ofgem energy price cap. Ofgem has admitted that prices are volatile and difficult to predict as we head towards 2025.

Some customers could immediately save £100 a year by moving from paying their bill every three months to paying by direct debit. Dame Clare Moriarty, chief executive of Citizens Advice, said the forecasts meant particularly families and people with disabilities faced “impossible choices”.

"For bills to remain at this high level... and with an expectation that they'll remain at that level for the foreseeable future, we're just expecting to see people continuing to be really squeezed."

READ MORE UK set for 14-inch snow bomb that'll explode over 'every corner' of Britain

And ahead of the new year, Sarah Coles, head of personal finance, Hargreaves Lansdown, has rounded up all the changes that were announced in the Autumn Budget - and how they could impact your wallet. They range from income tax to stamp duty...

Frozen income tax

Chancellor Rachel Reeves has chosen not to extend the freeze on income tax thresholds, which will now begin to rise again in 2028. Tax thresholds usually rise in line with inflation. In 2022, however, the previous Conservative government froze thresholds until 2028.

The policy to freeze the limits means that more people pay higher rates of tax as their salary increases and they move into higher tax bands. Explaining the decision, Reeves said: “Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people and take more money out of their pay slips. I am keeping every single promise on tax that I made in our manifesto.

“There will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions by the previous government. From 2028-29, personal tax thresholds will be uprated in line with inflation once again.” On the news, Alastair Black, head of savings policy at abrdn, said: “We are glad that the income tax freeze was not extended beyond 2028. Many thresholds haven’t moved for several years.

“While more people will continue to be pulled into a higher tax band while the freeze is still in place, the impact will be lessened in the future.”

Frozen National Insurance

As widely predicted, the Chancellor announced increases to the rate of National Insurance contributions (NICs) paid by employers in the 2024 autumn budget. The primary rate of secondary Class 1 NICs will increase by 1.2% to 15% (from 13.8%) effective 6 April 2025. The Class 1A and Class 1B employer rates will also increase in line with this change.

The Class 1 NICs secondary threshold, at which employers start to pay NICs, will also be reduced to £5,000 (from £9,100) per year. This change will take effect from 6 April 2025 and last until 5 April 2028. Thereafter, the secondary Class 1 NICs threshold will be increased annually in line with the Consumer Price Index (CPI).

Capital gains tax

The main rates of Capital Gains Tax from 10% and 20%, that apply to assets other than residential property and carried interest, to 18% and 24% respectively for disposals made on or after 30 October 2024, have been hiked. The main rate of Capital Gains Tax that applies to trustees and personal representatives from 20% to 24% for disposals made on or after 30 October 2024.

The rate of Capital Gains Tax that applies to Business Asset Disposal Relief and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026.

Stamp duty

In September 2022, the Government announced a temporary increase to the thresholds above which SDLT must be paid. The temporary increase is due to end on 31 March 2025, meaning that any transaction which completes thereafter will be subject to the increased rates of Stamp Duty. While this date might seem far away, buyers and sellers alike ought to be aware that an average residential property transaction takes between 12 and 16 weeks to complete, but can, in certain circumstances take much longer. Typically, these circumstances are generally only uncovered during a transaction. It is also worth bearing in mind that this timeframe does not take into consideration the time it may take to attract a buyer from the date the property is first listed.

Frozen Inheritance Tax

Inheritance Tax is generally payable at the rate of 40% on the part of someone’s estate over the threshold of £325,000. If the deceased left 10% or more of their estate to charity, the rate is reduced to 36%. No Inheritance Tax is payable on assets over £325,000 left to a spouse or civil partner. If that spouse or partner has already died and did not use their full £325,000 allowance, then the unused portion can be transferred to the survivor’s estate. This means that the survivor’s estate could potentially have a total allowance of £650,000.

For a property left to immediate descendants such as children or grandchildren, there is a further £175,000 allowance. This is known as a residence nil-rate band’, and is available for the estate of both spouses. Thus meaning that there is a total potential allowance of £1 million available for a couple.

Council tax bills

All properties were valued and put into a valuation band between A and H – in England these bands are based on their value on 1st April 1991, not their current value. The valuation band determines how much Council Tax you pay and is set by the Valuation Office Agency (VOA) which is a central government agency.

Car tax

Owners of older, classic cars are set to face a tax hike from 2025 as vehicle excise duty (VED) fees will rise for almost all petrol and diesel car owners next spring. The changes are part of new rules introduced by the Driver and Vehicle Licensing Agency (DVLA) that are being implemented in April 2025. Vehicle Excise Duty (VED) is an annual tax paid by owners of vehicles that are driven or kept on public roads.

How much a vehicle owner pays in VED depends on a number of factors including the type of car owned, when it was first registered, or its environmental performance. Some vehicles are exempt, and until now, this included fully electric cars.

Alcohol duty freeze ends

Alcohol Duty rates last increased, in line with Retail Price Index, on 1 August 2023 following an announcement at Spring Budget 2023. At Autumn Statement 2023, Alcohol Duty rates were frozen until 1 August 2024. This freeze was extended until 1 February 2025 at Spring Budget 2024.

At Autumn Budget 2024, the Chancellor of the Exchequer announced that Alcohol Duty rates on non-draught products will rise in line with Retail Price Index from 1 February 2025. Although the Office of Budget Responsibility assumes a Retail Price Index increase each February, in practice alcohol duties have been cut or frozen on several occasions over the past decade.

Cigarette taxes will rise

Reeves also set out immediate above-inflation increases of 2% on tobacco and 10% for hand-rolled tobacco. On alcohol duties, she said that, from February 2025, there would be a 1.7% reduction in draught beer duty, to shave "a penny off a pint in the pub".

However, rates on non-draught products, such as wine and spirits, will rise by the higher RPI measure of inflation. Defending the rise, the chancellor said "two-thirds of alcoholic drinks sold in pubs are served on draught".

TV Licence

The cost will be rising £5 to £174.50 a year - a considerable bill for many families across the UK. The latest rise has sparked more frustration, with some viewers threatening to cancel their licence fee because the cost is becoming too much.

Energy bills

Energy regulator Ofgem is urging billpayers to shop around as it announced another price rise in January - the second of the winter. Someone paying by direct debit and using a typical amount of gas and electricity will pay £1,738, or £21 a year more, with bills now over 50% higher than pre-Covid levels.

The quarterly cap by regulator Ofgem sets a limit on the cost of each unit of energy, and affects 26 million households in England, Wales and Scotland.

It was always meant to be a backstop, and Ofgem said more options had emerged from suppliers, with a greater choice of fixed-price tariffs for customers.

The best deals are cheaper than tariffs based on the price cap. But, while offering certainty, anyone signing up risks missing out were prices to fall later next year.