Six changes to personal finances in 2025 – and how to manage them

With the arrival of 2025, personal finances are set to undergo significant changes, driven by shifting economic landscapes and evolving policies.

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Myron Jobson, senior personal finance analyst at interactive investor, outlines the six key changes affecting personal finances in 2025 and offers insights on how to navigate them.

1) Trickle-down effects of employer NI increase

• From 6 April 2025, the rate of employer National Insurance (NI) contributions will increase to 15%
• The threshold at which employee earnings become liable for NI will drop from £9,100 to £5,000.

Myron Jobson says: “A higher tax burden on businesses does not exist in isolation - it often cascades through the economic chain, impacting employees and consumers alike.

“For employees, this could result in limited wage growth, reduced benefits, or even job cuts as businesses seek to manage costs. For consumers, it may translate to higher prices for goods and services as companies pass on the additional financial strain. Ultimately, these pressures erode disposable incomes, contributing to a more challenging economic environment for households.

“This move might encourage employers to utilise the existing salary sacrifice regime, a win-win benefit that allows workers to lower their taxable income, potentially avoiding tax traps like the High-Income Child Benefit Charge. It also enables employers to reduce their National Insurance tax burden.”

2) Expansion of free childcare

• From September 2025, up to 30 hours of free childcare will be available for eligible working parents with children from nine months old up to school age
• The government estimates families could save an average of £6,900 annually by using the full entitlement.

Myron Jobson says: “The 30-hour free childcare initiative is a financial lifeline for many parents, easing the financial burden of childcare and helping them balance work and family life. It’s especially beneficial for those looking to return to work or increase their working hours, as it makes childcare more affordable.

“To be eligible for free childcare, you and your partner must each meet the work and earnings requirements unless an exception applies – including having an adjusted net income below £100,000 each per year. For parents earning just above £100,000, salary sacrifice can be a savvy tool. By exchanging part of your salary for non-cash benefits such as pension contributions, you can reduce your taxable income to remain within the eligibility threshold. This approach not only retains access to the childcare scheme but also boosts pension savings - a win-win for family finances and long-term planning.”

3) Rail fare increases

• Regulated rail fares in England will rise by 4.6% in 2025, exceeding inflation, while the cost of most railcards will increase by £5
• These changes will take effect on 2 March 2025.

Myron Jobson says: “Above-inflation increases in rail fares hit commuters hard, straining budgets when many are already grappling with heightened living costs.

“To save money, consider buying season tickets if you travel frequently, using railcards for discounts, or splitting your journey into separate tickets when it’s cheaper. Planning ahead and travelling during off-peak hours can also help reduce costs. Every little saving adds up in the face of these relentless price hikes.”

4) Stamp duty changes

• Among changes to stamp duty From 1 April 2025 include: the zero-rate threshold for main residences will fall from £250,000 to £125,000; while the threshold for first-time homebuyers will drop from £425,000 to £300,000.

Myron Jobson says: “These changes will add to the existing housing affordability squeeze, further hindering progression on to and up the property ladder for many. The higher upfront costs, in addition to the property value and professional fees, will be a significant barrier for homebuyers.

“This may trigger a surge in housing market activity as prospective buyers rush to complete purchases before the changes take effect. Consequently, this could push house prices higher due to increased demand outstripping supply.

“Mitigating the impact of higher stamp duty isn’t easy, particularly in areas where property prices are high and competition is rife. Options include considering a cheaper property or negotiating better deals with sellers.”

5) Council tax increases

• Council tax bills in England are expected to rise in April. Local authorities providing social care can increase rates by up to 5%, while others can raise them by up to 3%.

Myron Jobson says: “Many households will face above-inflation council tax increases from April. These rises are often driven by pressure on local authorities to fund essential services such as social care, education, and waste management amid rising costs.

“However, discounts and exemptions could help eligible households. Single occupants can benefit from a 25% discount, while certain groups, such as those with physical or mental disabilities or those on low incomes, may qualify for further reductions.

“It’s worth checking with your local council to see if you’re eligible, as every little saving helps in today’s challenging economic climate.”

6) Falling interest rates

• The Bank of England held interest rates at 4.75% in December 2024, following two reductions earlier that year
• Markets predict further cuts in 2025.

Myron Jobson says: “Uncertainty will always surround interest rate discussions, but the general trend points downward.

“Cuts to the Bank of England’s base rate are likely to lead to lower mortgage rates, but they also mean the best savings rates are on borrowed time. Savers should act quickly to secure the best deals before they disappear.

“Those who can afford to lock away their money for at least five years or more should consider investing for the potential of long-term, inflation-beating returns that far outstrip current savings rates.”