When a new calendar year rolls around, we usually feel ready for change and transformation — but the same can’t always be said for a new tax year.
With the 2025/26 tax year underway, it’s important to make sure you’re aware of any financial updates which might impact you.
Many of these changes were first outlined by the UK government in the 2024 Autumn budget (and elaborated on in the 2025 Spring Statement).
These proposals have since come into effect in the 25/26 tax year.
While some things – such as the ISA allowance – have stayed the same, there are other amendments which might still affect your savings, investments, or pensions.
We’ll cover the following changes in this blog:
- Scottish tax band changes 2025/26
- State Pension changes
- Capital gains tax changes
- Student loan repayment threshold
- Minimum wage increase 2025/26
- Employers National Insurance contributions
- Statutory pay changes
- Other changes
- Conclusion
Scottish tax band changes 2025/26
If you’re a Scottish taxpayer, you may be impacted by the changes which have come into force in the new tax year.
Prior to this, those earning over £28,850 in Scotland paid more income tax than if they were based elsewhere in the UK [1].
With amendments to tax band thresholds, your take-home pay could be impacted by these new guidelines.
The Basic and Intermediate tax bands have been raised with the intention of protecting people from “tax hikes” (which can occur when pay increases push someone into a higher tax bracket).
Higher earners may experience changes, too, with a new Advanced income tax band set at a rate of 45%, and 1p added to the Top Rate threshold (making the rate of tax for this band 48%). Please see table below for relevant income brackets [2].
Here are the key changes:
- Basic and Intermediate rate thresholds have increased by 3.5% for the 2025/26 tax year.
- Frozen tax thresholds for those paying income tax in Higher, Advanced, and Top Rate bands as detailed below.
Tax bands breakdown:
If you want to lower your income tax bill, you could always look at contributing more money towards your workplace or personal pension.
This can be effective (especially for higher earners), as income that would have gone to the government as tax, goes directly into your pension instead (due to pension tax relief allowances).
Remember, money put into your pension is exempt from income and capital gains tax.
When it comes to withdrawing from your pension (it remains unavailable until the age of 55, rising to 57 in 2028), you’ll typically be allowed to take 25% tax-free.
If you’re looking to learn more about how you can receive your pension, check out our blog on taking a lump sum from your pension.
State Pension changes
Other tax year changes to be aware of include updates to the State Pension, which may call for an adjustment in your retirement outlook.
At the start of the new tax year for 2025, the State Pension increased by 4.1%; for those who qualify for the new full State Pension, their weekly earnings will rise to £230.25 a week (previously £221.20).
If you qualified for the State Pension prior to 2016, then the weekly payment goes up to £176.45. Your personal State Pension forecast can be calculated on the government website.
Remember, qualifying for the State Pension – and the amount you receive – is based on the number of years you have contributed National Insurance.
According to research on Retirement Living Standards, the State Pension amount falls short of what would ideally be needed for even a “minimum” retirement lifestyle. [3].
This is why it’s important to plan for your retirement, so you can embrace the lifestyle that works for you after leaving the world of work.
Due to compound growth, you could get the most out of your pension by contributing to your pension pot as early on in your career as possible.
Of course, if your retirement is drawing closer, you can also increase the amount you contribute each month. Or, if you haven’t already, open a Personal Pension alongside your workplace pensions to boost your savings.
If you’re not sure about what type of pension is best for you, check out our blog on the difference between a State Pension and a personal pension.
Capital Gains Tax changes
New tax year changes have also been made to Capital Gains Tax (CGT).
CGT refers to the tax applied to the profit you make through selling (sometimes known as ‘disposing of’) an asset that has increased in value. This tax applies exclusively to the gains made, and certain assets are tax-free.
While the lower end of the CGT allowance has remained unchanged for individuals and trustees (£3,000 and £1,500, respectively), there have been more significant reforms that came into effect as of 30th October 2024.
Let’s take a look at the breakdown of higher CGT rates:
- Basic rate taxpayers have seen CGT rise from 10% to 18% (applicable to non-residential property and carried interest).
- Higher rate taxpayers have seen CGT rise from 20% to 24% (applicable to non-residential property and carried interest).
- Trustees & Personal Representatives have seen CGT rise from 20% to 24% (applicable to disposals on or after 30 October 2024).
Residential property CGT stays the same at 18% for the basic rate and 24% for the higher rate. It’s also worth noting that Business Asset Disposal Relief (BADR) has increased from 10% to 14% as of April, with this set to rise again to 18% in April 2026.
Remember, you don’t have to pay CGT if the total amount of your gains is under the tax-free allowance for this financial year.
How do CGT changes impact you?
Changes to CGT could see knock-on effects for the following groups:
- Property investors and landlords who choose to sell their rental properties will receive higher CGT bills, due to these increased tax rates.
- Business owners and entrepreneurs hoping to sell shares of business assets will face higher tax liabilities, due to BADR rates increasing over time.
- Anyone who is invested may have to compromise on investment choices to avoid paying tax. That’s why it could be worth thinking about your disposal strategies to minimise exposure to these higher CGT rates.
You can access further details on CGT on the government website [4].
Student loan repayment threshold
Another one of the changes to the tax year introduced for 2025/26 relates to the student loan repayment threshold, with changes varying depending on your loan plan.
This may impact graduates still paying back their loan, as well as employers who handle paycheques in accordance with this.
The “repayment threshold” refers to the point at which borrowers need to start repaying their student loan, and what amount. The threshold for postgraduate loan repayment remains unchanged at £21,000, with the repayment thresholds and deduction rates below [5].
If you have a student loan (and depending on your plan and salary), these changes could mean lower repayments, or no repayment obligations at all if your earnings are below the new thresholds.
If you’re unsure of what this might mean for your take-home pay, make sure to check your most recent payslip, so you can then budget accordingly.
Minimum wage increase 2025/26
There has been a National Minimum Wage (NMW) increase for the tax year 2025/26. You can see the new minimum rates – including National Living Wage – broken down below:
These changes were proposed as part of the government’s plan to boost the local economy. It also narrows the age-based wage gap.
For individuals on minimum wage, this increase in earnings means not only the chance to spend more, but also the opportunity to put away more money for the future!
Employers National Insurance contributions
The changes to National Insurance (NI) for this tax year will have implications for employees and employers alike [6].
Let’s take a look at a summary of the changes:
- Employer’s National Insurance Contributions (NICs) have risen by 1.2%, making the rate 15%.
- The secondary threshold for Employer’s will decrease from £9,100 to £5,000 a year.
- The Employment Allowance will increase from £5,000 to £10,500 (the previous £100,000 threshold for eligibility has been removed).
- Income tax and NI thresholds which were frozen prior to this tax year, will not be extended past 2028/29 tax year.
- Support for businesses employing veterans has been continued, with NI relief to support the employ of veterans has been extended.
- Lower Earnings Limit (LEL) and Small Profits Threshold has increased by 1.7%.
- The Married Couples Allowance and Blind Person’s Allowance has been increased by 1.7%.
While National Insurance rates haven’t directly been increased for workers, some will still feel the effects of these new rates.
This is partially because the hike in National Insurance for employers could lead to companies’ hiring fewer people, also meaning there may be fewer salary increases.
As the threshold at which NICs begin has also been lowered, it is more likely to impact part-time or lower salaried roles, as these were previously excluded from NIC.
Statutory pay changes
Sickness is an unavoidable part of life, and statutory sick pay exists so that workers are protected from being unwaged during times of illness.
Statutory sick pay now comes into effect when an employee is off work for more than three consecutive days, but less than 28 weeks (providing the employee has made NIC).
In this fiscal year, landmark changes from the government are intended to protect income and allow families to budget accurately, even when a parent is off work.
Families can also prepare for challenging times by saving for rainy days.
Emergency savings can, after all, offer a welcome buffer zone during hard times; check out our blog to find out how much is enough when building an emergency fund.
Other changes
While we’ve covered the headline changes for the 2025/26 tax year above, it’s also important to note a few other changes that have come into effect, including:
Stamp duty
The stamp duty threshold for first-time buyers has been lowered from £425,000 to £300,000. Meanwhile, home movers will now pay stamp duty on purchases over the £1250,000 threshold (up from the previous rate of £250,000) [7].
Inheritance tax freeze & new pension rules
As of the 2025/26 tax year, anything you leave in your will above £325,000 could be taxed at a rate of 40%. This limit goes up to £500,000 if you pass on your home to your children or grandchildren, and up to £1 million if you leave everything to a spouse or civil partner.
These tax-free limits are frozen until 2030, so as prices rise, more people could end up paying. And from April 2027, any unused pension savings will also count towards your estate; so, it’s worth thinking ahead about the best way to leave an inheritance [8].
Council tax rises
Many households in England are now facing higher council tax bills. This is because councils have been given the green light on raising rates by up to 5% this year, without needing a public vote (this has been required previously).
With the average household on a Band D council tax bill at £2,171, that’s an increase of around £109 for many households. If you haven’t already, it’s worth checking your new bill and factoring the potential rise into your overall budget [9].
Increases in alcohol & tobacco duty
Tobacco and alcohol taxes have also gone up recently, with changes taking effect from late 2024 and early 2025.
From 30th October 2024, tobacco became more expensive, with duty rising by inflation plus 2% (and even more for hand-rolling tobacco, which went up by inflation plus 10%) [10].
Alcohol duty went up on 1st February 2025, following inflation at 2.7%.
But there’s a small win for pub-goers: tax on draught drinks like beer under 8.5% strength was cut by 1.7%, knocking about 1p off the price of a pint. Cheers![11]
Conclusion
To make sure you’re putting your best financial foot forward in the 2025/26 tax year, it’s good to be fully tuned-in to the above changes and, most importantly, aware of how they might affect you.
For most of us, take-home pay is what really matters.
Working this out gives you the best chance of budgeting effectively in order to maximise your financial potential. You could also consider ways to make your money go further, with options such as tax wrappers like Cash or Stocks and Shares ISAs, and pensions to reduce your tax liabilities.
liabilities.
Remember, Wealthify does not provide financial advice. If you’re feeling lost or overwhelmed, you should seek advice from a professional financial advisor who can help with guidance on managing money and/or investments.
You can also find more general tips and info on how to get ahead in the new tax year over on our blog.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
References
[1] https://www.gov.scot/publications/scottish-income-tax-2025-2026-factsheet/pages/2/
[2] https://www.gov.scot/news/income-tax-changes/
[3] https://www.retirementlivingstandards.org.uk/
[4] https://www.gov.uk/government/publications/changes-to-the-rates-of-capital-gains-tax
[5] https://www.gov.uk/repaying-your-student-loan/what-you-pay
[8] https://www.gov.uk/guidance/inheritance-tax-if-youre-a-long-term-uk-resident
[10] https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/tobacco-duties/
