This Month - Welcome to 2025: Tax Changes For 2025: Good Morning Vietnam.
Welcome to 2025
The start of a new year often prompts us to set resolutions and goals for various aspects of our lives. Just as we commit to healthier lifestyles, professional growth, or personal development, pledging to secure the future of your Estate is a resolution that brings lasting peace of mind.
As you set your resolutions for the coming year, consider making Estate Planning a priority. It's an investment in the financial well-being of your family and the preservation of your hard earned assets.
As we bid farewell to the old and embrace the new, we at Phoenix Estate Planning wish you a fabulous & prosperous New Year.
Tax Changes For 2025
We take a look at the biggest tax changes coming in 2025, and what they mean for your money.
1. Inheritance tax freeze and new pension rules
When you pass away, if your Estate is worth more than £325,000, your beneficiaries will be liable to pay inheritance tax (IHT) of 40% on anything above this threshold. The threshold rises to £500,000 if the Estate includes a residence passed to direct descendants. If you are married or in a civil partnership and upon 1st passing away all is passed onto surviving spouse/civil partner, then you have £1m of tax-free allowance.
The current IHT thresholds were due to be frozen until 2028, but this has been extended until 2030. As time goes on, the impact of inflation means that more Estates are likely to exceed the frozen IHT threshold.
In addition, unspent pension funds will count as part of your Estate for IHT purposes from April 2027. While this change is still some years away, you may want to consider it now when making plans to pass on your assets.
2. Council tax rises
Households should brace themselves for higher council tax bills from April 2025. Most councils in England are able to raise council tax rates by 5% without needing to call a referendum. Given the average Band D council tax bill in England is currently £2,171, this could mean a rise of £109.
3. Capital gains tax rates for assets increased
Capital gains tax (CGT) is charged on the profits made from selling assets, such as investments or valuable possessions. In the Autumn Budget, the Chancellor announced that CGT rates on assets would increase from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers.
The change took place immediately and brings CGT rates on assets in line with rates on selling a second property. Remember, you'll only pay CGT on any gain you make, rather than the sale price. Gains can also be offset against any expenditure or losses made when selling other assets.
4. Stamp duty holiday comes to an end, plus rates hiked on second homes
The current extra stamp duty relief for first-time buyers and home movers in England and Northern Ireland is set to end on 31 March 2025. From 1 April, the stamp duty threshold for first-time buyers will drop from £425,000 to the previous rate of £300,000.
From the same date, home movers will pay stamp duty on purchases over £125,000, rather than the current £250,000. For example, based on the new thresholds and stamp duty rates, a home mover completing on a property worth £500,000 in England or Northern Ireland would pay £15,000 in stamp duty rather than the current level of £12,500.
The Autumn Budget also held bad news for anyone looking for a buy-to-let or second home, as it was announced that stamp duty for buy-to-let properties and second homes would increase by two percentage points. This change took place immediately.
5. Increases in tobacco and alcohol duty
Taxes on tobacco and alcohol were also targeted for rises in the Autumn Budget. From 30 October 2024, tobacco duty has risen by the Retail Price Index (RPI) measure of inflation plus 2%. Duty on hand-rolling tobacco has risen by RPI plus 10%.
Meanwhile, from 1 February 2025 alcohol duty will rise in line with September 2024's RPI rate of inflation, which stood at 2.7%. However, alcohol duty rates on draught products, such as beer, below 8.5% alcohol by volume (ABV) will be cut by 1.7%, reducing the amount of tax on an average-strength pint by 1p.
6. Employer National Insurance increase
The government will increase National Insurance contributions for employers from 13.8% to 15% from 6 April 2025. In addition, the threshold for when employers need to start paying the tax will be lowered from £9,100 to £5,000.
Although these changes won't affect most people directly, prior to the Budget some critics suggested that such a change could have a knock-on effect on employees, through employers offering lower pay increases or less generous employment benefits in future
✅ Protect, Plan and Pass On...
Worried about your pension taking your Estate over the IHT threshold? - give us a call to discuss further.
Good Morning Vietnam
Robin Williams passed away on August 11, 2014. According to his Will, he left his $100 million Estate to his three children and instructed his wife to live in their shared Californian home until her passing (after which the Estate be split amongst their children).
Sounds pretty straightforward, right?
Unfortunately, family members can still challenge the terms of a Will, particularly when there is ambiguity in its language. And Williams failed to include in the document those distinctions that dictated where his personal belongings were to be allocated. While the family did manage to resolve the dispute in court, the settlement arrangements were never made public. It is only known that the wife received a few of Williams’ belongings (like his watch and their wedding gifts) and still resides in their shared home.
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