New regulations on tax, benefits, wages and more will impact the personal finances of everyone in the UK next year. Throughout 2025, a series of changes will be implemented, leading to increased bills for some and savings for others.

Household bills predicted to rise over the year include energy bills, water bills and the TV licence fee. The cost of bus travel will increase when a new fare cap is introduced, and train ticket prices will go up in March. Conversely, individuals who receive benefits from the Department for Work and Pensions (DWP) or HM Revenue and Customs (HMRC) will see their payments rise from April. Changes to Universal Credit rules and the earnings threshold for Carers Allowance will also affect some claimants.

Savers with Premium Bonds will experience a less generous prize rate at the start of the year. Meanwhile, more first-time buyers will face paying stamp duty when the rules alter later this year, reports the Manchester Evening News.

Energy bills are set to increase as a new price cap comes into effect – January 1

From January 1, household energy bills are due to rise again. Ofgem confirmed the price cap will increase by 1.2 per cent in the new year. The regulator has announced that the typical bill for a household in England, Scotland and Wales will see an increase of just over £20 per year, taking the average annual bill from £1,717 to £1,738, or an increase of roughly £1.75 per month. This comes after the price cap rose by 10 per cent in October.

Ofgem is encouraging customers to capitalise on the growing choice among suppliers and hunt for the best deal to help keep their bills low, stating that households could pocket savings of up to £140 by shopping around for different tariffs. The latest price cap is 10 per cent or £190 lower than it was a year ago, and 57.2 per cent or £2,321 less than during the energy crisis, which was sparked by Russia’s invasion of Ukraine in February 2022.

Introduced by the government in January 2019, the energy price cap sets a limit on the price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use. Ofgem adjusts the price cap for households every three months, largely based on the cost of energy on wholesale markets.

Mature woman moves in to new home, unpacking boxes and enjoying in her new home. She is resting and using smart phone.
New regulations on tax, benefits, wages and more will impact the personal finances of everyone residing in the UK (Image: Getty)

The bus fare cap is set to rise to £3 from January 1

Single bus fares in England have been capped at £2 outside London, where they are £1.75 per journey for most routes, since January 2023. The government maintains that the higher £3 cap will still result in savings of up to 80 per cent on some routes for passengers.

The cap will ensure that no single bus fare on routes included in the scheme will exceed £3, and for routes where fares are currently less than £3, any increases will be limited to inflation as usual.

Parents of children at private schools face higher fees – January 1

Starting from January 2025, the VAT exemption on private school fees will be removed, potentially leading to increased costs for some parents sending their children to these institutions. At present, independent schools benefit from not having to add 20 per cent VAT to their fees due to an exemption for the supply of education. This is set to change next year with the removal of the VAT exemption and business rates relief for private schools.

The government intends to use the additional revenue to fund the recruitment of 6,500 new teachers in state schools. However, there has been criticism suggesting that this could result in increased school fees to compensate for the extra charges.

Treasury minister James Murray has previously defended the policy, stating that most private schools should be able to manage fee hikes affordably for parents by absorbing a “significant proportion” of the new VAT costs. He noted that some schools have pledged to take on the full VAT liability, while others plan to limit fee increases to either 5 per cent or 10 per cent.

Premium Bond draw winners announced, but prize rate will be cut – January 2

Premium Bond holders may need to consider other savings options following a statement from NS&I announcing that from the January 2025 draw, the prize fund rate will be less generous. The rate is set to decrease to 4 per cent, a drop from the current 4.15 per cent.

The chances of winning in January are to remain unchanged from December standing at 22,000 to one. The upcoming changes also signal an estimated drop in the number of £100,000 and £50,000 prizes for January – with 82 and 166 prizes respectively, compared to 83 and 167 in December. The lucky winners of January’s draw will be revealed on Thursday, January 2.

Commenting on these developments, NS&I Retail Director Andrew Westhead explained: “We carefully review our savings rates in response to changes in the broader market. These adjustments help us meet our net financing target while balancing the interests of our savers, taxpayers and the wider financial services sector.”

Meanwhile, Laura Suter, AJ Bell’s Director of Personal Finance, observed: “The rates are now significantly below the top rates in the market, meaning savers are paying a decent premium for the safety and brand name of NS&I. Anyone with money in easy access NS&I accounts should weigh up whether they would be better switching to a rival to clinch some extra interest.”

Young man having problems while analyzing his financial bills at home.
From January 1, household energy bills are due to rise again (Image: Getty)

New Ofcom legislation regarding mobile and broadband price rises begins January 17

Ofcom is set to implement a ban prohibiting mobile phone carriers and broadband providers from tying price increases to inflation rates during a customer’s contract period. The new regulations will compel companies to clearly communicate any potential price hikes in terms of exact monetary amounts.

At present, many leading phone, broadband, and pay TV services tie their price increases to projected inflation figures. Ofcom has criticised this approach as unfairly transferring the burden of inflation onto consumers. However, starting from January next year, any contract-related price rises must be stated explicitly in pounds and pence.

Ofcom states: “From 17 January 2025, phone, broadband and pay TV providers will be prohibited from including inflation-linked, or percentage-based, price rise terms in all new contracts. This means consumers will be able to enter into contracts featuring £/p information ahead of annual price rises in 2025.”

Cristina Luna-Esteban, Ofcoms telecoms policy director, commented: “With household budgets squeezed, people need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation. We’re stepping in on behalf of phone, broadband and pay TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK.”

Cheaper pub pints but other drink prices to rise – February 1

From February 1, a penny will be shaved off the price of a pint as changes to alcohol duty take effect. In Labour’s inaugural Budget, Chancellor Rachel Reeves revealed that the government plans to reduce alcohol duty rates for draught products by 1.7 per cent from February next year, equating to a saving of roughly 1p per pint. However, the alcohol duty on most other items is set to increase.

Alcohol duty rates on non-draught items will rise in line with RPI. The recent duty hikes on wine and spirits follow last August’s increases, which were the largest in nearly half a century, adding 20 per cent to excise duty on over 85 per cent of all wines on the UK market and more than 10 per cent to duty paid on full strength spirits.

Interest rates could be cut again – February 6

Interest rates could see several cuts in 2025. Every six weeks, policymakers at the Bank of England convene to decide whether to maintain the base rate at its current level or alter it. Just days before Christmas, the Bank’s Monetary Policy Committee (MPC) opted to keep interest rates at their existing level of 4.75 per cent. During 2024, the Bank reduced the rate twice, first in August and then again in November.

After the recent verdict, Bank of England chief Andrew Bailey indicated that policymakers are gearing up for a “gradual approach to future interest rate cuts” Nonetheless, he warned: “With the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.”

Several economic experts are now anticipating the next UK interest rate reduction could take place as early as February, forming what they believe could be one of three or four cuts throughout 2025.

Chief UK economist at Pantheon Macroeconomics, Rob Wood, noted: “We continue to think there is a good case for steady monetary policy easing next year despite the recent hawkish news from wages and inflation. But the MPC will have to be cautious in the face of inflation likely rising above 3 per cent in the spring, with highly visible price rises that could destabilise inflation expectations that are already above average and rising.”

Train fares set to rise on March 2

Come March 2, regulated train fares in England are pegged to rise by as much as 4.6 per cent. Also on the uptick are most railcard prices. This fare hike marks a full percentage point over July’s Retail Prices Index (RPI) inflation yardstick, the traditional measure Westminster governments leveraged until 2023 to settle caps on yearly regulated fare escalations. According to the Treasury, this 4.6 per cent uplift represents “the lowest absolute increase in three years”.

Regulated fares, which include season tickets for many commuter journeys, some off-peak return tickets on long-distance routes and various flexible tickets in major cities, face a rise implemented by train operators. Unregulated fares will also see an increase set by these operators.

Railcards will cost an additional £5, but the price for the railcard for disabled passengers will remain the same. According to the Treasury, the average savings for users of railcards, typically costing £30 annually, is “up to £158” each year.

April has been outlined as the month when council tax will see a hike

Next year, councils will as in every year enact annual tax increases. The government anticipates that an extra £1.8 billion will be generated through council tax in the financial year 2025/26. This means that households in the average Band D council tax bracket are set to experience a rise well above inflation, translating to a hike of over £100.

Following current regulations under the new Labour leadership, councils in England have the green light to increase tax rates by up to 3%, with an added 2% allowance for those providing adult social care. Authorities considering tax rate hikes beyond this 5% limit need to either obtain government approval or conduct a referendum.

From April 1, England and Wales can expect their water bills to surge by an average of £86

Regulator Ofwat has announced it will permit a hike in water bills by £157 for the average household over five years to fund a colossal £104 billion upgrade of the water sector. This marks a steep 36 per cent rise before taking inflation into account, which would be an additional factor.

Despite the total increase averaging at £31 yearly, April will see households feeling the squeeze with an average surge of £86 or 20 per cent a substantial amount concentrated in the first year. Smaller percentage increases are anticipated for the subsequent four years.

Consumer advocacy groups have sounded the alarm that the impending price rises will put many households under financial stress. Consumer Council for Water’s chief executive, Mike Keil, voiced concern: “These bill rises may be less than what water companies wanted but they are still more than what many people can afford.”

The finalised bill increase is much steeper than the 21 per cent, or £19 per year, uptick per household that the regulator preliminarily proposed last July.

Benefits and pensions are set to see a boost come April

Benefit disbursements from the DWP and HMRC are slated to climb in the upcoming spring. Most working-age benefits are on track to rise by 1.7 per cent in accordance with the CPI measure, while state pension payments are poised for a 4.1 per cent uplift, honouring the earnings growth component of the triple lock guarantee.

With this pension increase, the government anticipates that over 12 million pensioners will see up to a £470 escalation in their income next year. Benefit claimants should brace themselves for letters arriving in the new year that will outline the adjustments to their payments.

From April, the TV licence fee is set to rise

Households will need to budget for a £174.50 fee which marks a £5 uplift or an additional 42p per month. This increment follows the previous rise of £10.50, taking the fee from £169.50 in April 2024 to the new figure in April 2025. The household levy, which bankrolls a significant portion of BBC’s functioning, is slated for annual increases pegged to the consumer price index (CPI) inflation rate, as per government declarations earlier this year.

A TV licence remains a requisite for anyone tuning into live broadcasts on any platform or deploying the BBC iPlayer. In recognition of the financial hardships faced by many, the government plans to broaden the scope of the Simple Payment Plan (SPP). This expansion aims to enable an extra 9,000 unlicensed households to fragmentise the yearly fee into more digestible fortnightly or monthly instalments.

After the news broke, a representative from the BBC expressed approval, stating: “We welcome confirmation that the licence fee will increase in line with inflation next year. We want everyone to get value from the licence fee and we are committed to delivering trusted news, the best homegrown storytelling and those special moments that bring us together.”

April 1 will herald a pay surge for over three million workers across the nation

Individuals drawing from the National Living Wage or the National Minimum Wage can anticipate a rise starting in April 2025. The National Living Wage is set to rise from £11.44 to £12.21 per hour, a 6.7% increase, resulting in an extra £1,400 annually for eligible full-time workers. In parallel, the National Minimum Wage for 18 to 20 year olds will jump from £8.60 to £10.00 per hour, marking the largest ever increase.

The government plans to eventually eliminate age brackets for the National Living Wage and Minimum Wage, establishing a single rate for adults. Apprentice minimum hourly wages will also increase from £6.40 to £7.55.

These changes will lead to a pay rise for 3.5 million workers in 2025, according to government estimates. Chancellor Rachel Reeves stated: “This government promised a genuine living wage for working people. This pay boost for millions of workers is a significant step towards delivering on that promise.”

In a separate move, 1.2 million families on Universal Credit will benefit from changes to debt repayment rules. From April 2025, the Fair Repayment Rate will cap deductions from Universal Credit payments, reducing the maximum deduction from 25% to 15% of the standard allowance. This change will put an extra £420 per year in the pockets of affected households.

Earnings threshold for Carers Allowance set to rise in April

In a move that will benefit around 60,000 more carers, the earnings threshold for Carers Allowance is set to see a significant increase of £45 a week, the government has announced.

Carers Allowance is awarded to individuals who dedicate at least 35 hours a week to caring for someone. At present, eligibility for the allowance requires earning under £151 a week.

However, starting from April 2025, the threshold will be raised to match the equivalent of 16 hours a week at the National Living Wage, allowing carers to earn up to £196 a week without forfeiting their entitlement to the benefit.

This adjustment marks the most substantial uplift to the benefit since its inception in 1976, according to the government. It will enable a carer to have an annual income exceeding £10,000 while still qualifying for the weekly payments.

Additionally, the government has initiated an independent inquiry into overpayments of Carers Allowance, headed by Liz Sayce. This review follows criticism directed at the DWP for its stringent “cliff edge” policy regarding the allowance, which has resulted in some carers facing demands to repay thousands of pounds after unintentionally surpassing the earnings limit, occasionally by a mere £1.

Motorists to face tax increases from April 1

Starting on April 1, drivers purchasing new petrol, diesel, and hybrid vehicles will encounter a notable hike in first-year tax rates. The increase in Vehicle Excise Duty (VED) is part of the government’s strategy to encourage consumers to switch to electric cars, while expanding the tax difference between ‘higher polluting’ vehicles and electric ones.

A car’s first-year tax figure is determined by considering the amount of CO2 it emits. Currently, drivers of electric vehicles (EVs) are exempt from VED charges, while cars emitting between 111g and 150g/km pay £220. Those that emit more than 255g/km pay £2,745 for their first year.

However, from April 2025, EV drivers will be required to pay £10 for their first year’s VED. All other rates of first-year VED are set to significantly increase with rates for petrol, diesel and hybrid vehicles all being raised with most doubling.

A Treasury spokesperson informed Car Dealer Magazine that the change means, from April next year, a new Ford Puma driver can anticipate a first-year VED rate rise from £220 to £440, while a buyer of a Range Rover could pay as much as £5,490 up from £2,745 in that first year of ownership.

Changes to stamp duty – April 1

Stamp duty discounts will be less generous next year. First-time buyers in England and Northern Ireland will see the nil-rate band decrease from its current level of £425,000 to £300,000 from April – this band being the amount below which buyers pay no stamp duty. The higher threshold was introduced on a temporary basis in 2022.

The maximum purchase price for which first-time buyers pay the reduced rate of 5 per cent will revert to the previous level of £500,000, down from £625,000 currently. Meanwhile, for current homeowners, the nil-rate threshold for paying stamp duty, which stands at £250,000, will revert back to its previous level of £125,000.

This adjustment means that a greater number of first-time buyers will now be liable for stamp duty, with Nationwide predicting that around one-fifth of them will be affected by this change.

Non-dom tax status abolished – April 6

From April 2025, the government has declared it will put an end to the non-dom tax regime. Labour had already pledged in its election manifesto to target so-called non-doms, referring to UK residents whose permanent home is registered outside of the UK for tax purposes. Non-doms are currently required to pay taxes to the UK government only on their UK earnings and not on income generated elsewhere.

This arrangement allows the affluent to save substantial amounts of money by designating a domicile in a country with lower taxes. The decision to scrap non-dom status came as part of Ms Reeves’ Autumn Budget declaration. She said: “In our manifesto we made a number of commitments to raise funding for our public services. First, I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm, we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”

A residence-based tax system will replace the prior non-dom regime.

Free childcare offer extended – September 1

Next year, more adjustments from the government to the free childcare offer will come into force. Starting from September 2025, working parents with children aged nine months and older will be eligible for 30 hours of free childcare each week until their child begins school.

Education minister Baroness Jacqui Smith hailed the 2025 expansion as “an enormous increase in capacity”, noting it will more than double the rise in places seen over the previous five years. To qualify for this provision, working parents must individually earn between £9,518 and £100,000 annually. For couples, both partners must earn at least £9,518, and neither can have an income exceeding £100,000.

Additionally, from next year, some parents will benefit from 30 minutes of free childcare before school starts as part of the government’s new breakfast club initiative. Primary state schools are now encouraged to sign up for the “early adopter scheme” to test these new breakfast clubs, with the first expected to open in April of the following year.

In other news, university tuition fees in England are set to increase to over £9,500 for the upcoming academic year. Education secretary Bridget Phillipson announced the fee increase earlier this year, marking the first hike in eight years. She acknowledged that raising the maximum tuition fees for domestic students from £9,250 to £9,535 was “not been an easy decision”, but deemed it necessary to support universities dealing with “severe financial challenges”.

University tuition fees are set to increase in line with inflation, by 3.1 per cent, effective from the academic year 2025/26. The cap on university tuition fees in England was previously raised to £9,000 annually by the former government in 2012, but it has remained at £9,250 for domestic undergraduate students since 2017.

Ms Phillipson also revealed that maintenance loans for university students in England will see an increase next year. According to the government, this will provide students with an additional £414 per annum.