Tax changes in effect in April 2025

Four tax reforms took effect in April 2025. Using the PolicyEngine UK tax-benefit microsimulation model, we analysed these reforms, which will increase taxes by an average of £1,133 per household.¹

This analysis, requested and published by the Institute for Economic Affairs, featured in the Daily Mail's front-page article on the 28th March 2025, in two Express articles, and two other outlets.

From a combination of temporary reforms expiring and new tax reforms taking effect:

• The Government has allowed Stamp Duty Land Tax nil-rate thresholds to expire to £300,000 (from £425,000) for first-time buyers and £125,000 (from £250,000) for subsequent purchases. These thresholds determine the property value at which SDLT begins to apply. First-time buyers maintain a higher threshold than subsequent purchasers under this reform. This reform is the result of an expiry of a Stamp Duty Land Tax cut announced by then-Chancellor Jeremy Hunt in the Autumn Budget 2023 (expiring 31 March 2025).
• The Government set the Employer's National Insurance rate to 15% with the secondary threshold set to £96.14 (from £175) per week. We assume that the employer NI changes is passed on to employees at 40% in 2025, 50% in 2026, 60% in 2027, and 70% in 2028-2029, with the remainder split between business owners and prices. This reform was announced in the Autumn Budget 2024 and takes effect in April 2025.
• The Government had set Capital Gains Tax rates to change to 18% (from 10%) for basic rate taxpayers and 24% (from 20%) for both higher and additional rate taxpayers. CGT applies to profits from the sale of assets that have increased in value, with various exemptions including primary residences. This reform was in effect from the time of the Autumn Budget, but 2025/26 is the first full tax year of its implementation.
• Local authorities have increased Council Tax by 6.1% on average from 2024. This is set by local authorities. These reforms have been announced by councils over the last year.

We estimate the following revenue impacts for these reforms in 2025/26 (Table 1). For each tax, we include its static revenue impact. This assumes that individuals do not adjust their behaviour in response, representing simply the impact of the change in policy on existing households.

Reform	2025 static revenue (£ million)	Average per household (£)
Stamp duty: lower first home nil-rate threshold from 425,000 to 300,000	150	5
Stamp duty: lower primary residence nil-rate threshold from 250,000 to 125,000	1,200	43
Capital Gains Tax: raise rates to 18% and 24%	4,200	150
Council tax: raise by 5%	3,300	117
National Insurance: raise employer rate from 13.8% to 15% and lower threshold	22,900	818
Total	31,750	1,133

Table 1

Figure 1 shows the impact of these reforms on average in each household income decile. The highest decile’s household net income falls by £2,754, and the lowest decile £808.

Figure 2 shows the median tax rise by region.