Tax tips for 2025

2024 may have felt like an annus horribilis for some taxpayers but in terms of taxes paid by individuals, it could actually represent the eye of the storm. HMRC’s tax receipts statistics for December 2024 remain to be published but in the 11 months to 30 November 2024, the combined amount of National Insurance contributions (NICs) paid by individuals and income tax paid increased by a relatively modest 2.7%. In the 11 months to 30 November 2023 this was around £311bn and in the 11 months to 30 November 2024, this increased to a little over £319bn.

By comparison, the latest statistics published by the Office for National Statistics show that the annual growth in employee’s wages was 5.2%. That may come as a surprise to some and may be largely due to the cuts to employee NICs made ahead of the general election. Ultimately, it is likely to represent a temporary reprieve rather than a turning point, as tax thresholds and allowances remain frozen until 6 April 2028 and the increases to employers’ NICs rates are expected to flow through to individuals via slower wage growth.

Whilst that may not provide much new year cheer, there are a number of steps individuals can take to get their tax affairs in shape for the year ahead. We highlight some of the trickier choices taxpayers may have been putting off that now make sense to explore further.

Changing the ownership of investments

Following the slicing of tax allowances and exemptions in recent Budgets, it has never been more important to think about how to maximise what is available. One option for married couples and civil partners that is often put off due to the perceived hassle involved is changing the ownership of investment assets, such as a rental property. Rather than income and gains being split equally, it can be relatively straightforward to adjust the ownership of investments and in turn, save hundreds or thousands in tax bills. Similarly, it can sometimes make sense for some investments to be held in a company, rather than personally. However, it is important to bear in mind that extra steps and advice may need to be taken, such as submitting a signed Form 17 to HMRC for jointly owned property.

Becoming your own boss

Whilst the 2024 Autumn Budget had something for most people to dislike in terms of tax rises, the self-employed emerged relatively unscathed. The changes to NICs will not directly impact the tax treatment of a self-employed person, although they may soon see a rising employer’s NICs bill if they employ people. For those who are thinking of taking the plunge and becoming their own boss, this may be the time to do so. From 6 April 2025, if an employer made a £50,000 profit and sought to pay this out as salary to an employee in England, the employee would receive a net salary of £35,293. If instead that £50,000 of profit was made by a self-employed person, they could be nearly £5,000 better off.

Get gifting

The holiday season may be over, but it may make sense to keep the spirit of giving going into the new year. There is continued speculation that the chancellor may need to raise taxes further and the likes of inheritance tax (IHT) and capital gains tax are likely to remain obvious targets for further changes. One option that is often overlooked is that gifts can potentially fall immediately outside the scope of IHT if they are made regularly and leave the donor with enough income to maintain their usual standard of living. There is some effort needed in determining how much can be gifted but this is one of the most valuable IHT reliefs available and often worth the work involved. 

Whilst there may inevitably be more tax increases ahead, perhaps that could provide the nudge some need to take decisions they have been putting off that could help balance the books. The investment in time doing so could pay for itself.