As we step into 2025, new challenges and opportunities await for managing personal finances. While the New Year doesn’t mark a financial reset (that comes at the end of the tax year), it’s the perfect time to review your financial plans and prepare for what’s ahead.
From changes to taxes and interest rates to shifts in the economy, understanding the evolving landscape can help you make better decisions. Here’s a guide to the economic outlook, tax changes, and key financial considerations for 2025.
Economic Outlook 2025
- Inflation and Interest Rates: Inflation eased in 2024 but remains a concern in 2025. The Bank of England is likely to continue with gradual rate cuts, keeping mortgage rates higher than expected. First-time buyers and homeowners searching for new deals should shop around for the best offers.
- Wages vs. Inflation: Wage growth continues to outpace inflation, but ongoing inflation concerns and government budget impacts may affect spending power.
- Market Uncertainty: The Trump Presidency introduces potential economic instability, adding to heightened inflation worries. Diversifying your portfolio is crucial to prepare for uncertainty.
Tax Changes to Watch for in April 2025
- Capital Gains Tax (CGT): Adjustments for share disposals took effect in October 2024, so ensure you’re aware of the new rules.
- Stamp Duty (SDLT): The zero-rate threshold has been reduced to £125,000, with properties up to £250,000 now incurring a 2% charge.
- VAT on Private School Fees: From January 2025, private schooling fees are subject to VAT.
- Vehicle Tax for Electric Cars: Electric vehicles will now face the same tax as petrol and diesel vehicles starting in April 2025.
- National Insurance Contributions: Employer contributions rise from 13.8% to 15%.
- Carried Interest Tax: Rates increase from 28% to 32%, with further reforms expected in 2026.
- UK Non-Dom Regime: A new system introduces residency-based rules for foreign income. Non-doms should seek advice to navigate these complexities.
Financial Benefits in 2025
Despite the changes, there are some positives for personal finances this year:
- State Pension Increase: The new State Pension will rise by 4.1%, increasing the full payment to £230.25 per week, or an extra £470 annually.
- No Changes to Allowances: ISA and pension allowances remain unchanged. Be sure to maximize these “use it or lose it” savings opportunities before the tax year ends on 5 April.
Plan Ahead for Financial Success
Preparing for the year ahead is essential to make the most of your money. From understanding tax changes to navigating shifting economic conditions, staying informed will help you achieve better financial outcomes in 2025. Don’t forget to take advantage of allowances and shop around for the best deals to secure your financial future.
If you have any questions or wish to explore your options, reach out to us. Our team of experts is ready to assist you. please don’t hesitate to contact us on 0333 241 3350 or email info@richmondhousewm.co.uk
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