9 key financial changes in 2025: National Insurance, energy bills, pension changes and more

A look at the good, the bad and the ugly money changes affecting your cash in 2025.

The new year brings a number of big financial changes that could dent your wallet or boost your income.

Here’s what you need to know and what you can do to grab any extra cash during the next 12 months.

1. State Pension up by 4.1%

Retirees are in for another big increase to their State Pension payments this year, thanks to the triple lock.

Those on the full New State Pension will see their income move by 4.1% in April – from £221.20 to £230.25. Annual incomes will increase from around £11,502 to £12,016.75.

For those on an old Basic State Pension, the weekly pension payments will jump from £169.50 to £176.45, representing an increase of £363 per year.

2. Council Tax to soar by £100

Following the October Budget, the Government has confirmed a freeze on the Council Tax cap.

This means Local Authorities can hike rates by up to 4.99% – anything further would require a referendum.

According to forecasts, this move could add another £109 to the average bill for a Band D property, with the typical household already forking out £2,171 per year.

Most councils increased Council Tax by the maximum allowed last year, and given the financial pressures faced by councils across the country, it’s fair to assume that similar hikes will be made this year. 

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3. Energy Price Cap rising this month

Unsurprisingly, 2024 was a turbulent year for the energy sector.

Back in July, regulator Ofgem lowered the Price Cap (the maximum cost per unit of energy) by 12%, meaning the average household bill fell from £1,928 to £1,690 per year.

This was followed by a further 7% cut in July.

However, the trend did not continue into the second half of 2024, with the Price Cap soaring by 10% in October and this was followed by a further 1.2% hike this month.

4. Base Rate cuts

Interest rates will almost certainly come down this year.

The Bank of England had predicted as many as four Base Rate cuts across 2025, which would likely take it down to 3.75%. 

However, weaker-than-expected economic data has changed expectations, with many now believing we'll only see two reductions over the year. 

While a fall in the Base Rate is good news for mortgage borrowers, it is typically less favourable for savers.

That said, it is still possible for savers to earn a decent return on their cash, with providers offering rates of up to 5% variable and 4.8% fixed.

You can read the top savings rates in our latest round-up.

5. National Insurance hikes for employers

In one of the most surprising announcements in her Budget, Chancellor Reeves announced a 1.2% increase in National Insurance (NI) payments for employers.

While this is technically an increase for companies, it’s likely that average people will take the hit.

Following the news, Sainsbury’s boss Simon Roberts said his firm’s bill will soar by £140 million, while M&S has also said that its bill will increase by £60 million this year.

Inevitably, supermarkets will pass these costs onto customers, with food inflation already up 2.3%, according to the latest data from the British Retail Consortium.

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6. Universal Credit and other benefits to rise

It’s not just the State Pension that is increasing with the start of the new tax year, but a host of other benefits too.

These benefits grow each year in line with the consumer price index measurement of inflation for September, which was registered as 1.7%.

For example, the standard Universal Credit allowance for under 25s will move from £311.68 to £316.98 per month, while for those over 25 it will move from £393.45 to £400.14.

Other benefits will also increase at this point.

For example, the higher rate of Attendance Allowance (the disability benefit for those over 65) will move to £110.40 per week.

The standard minimum for Pension Credit will move to £227.10 for a single person and £346.60 for a couple.

7. Increase to National Living Wage

The National Living Wage will also rise in 2025.

The rate you get depends on your age, and whether you’re an apprentice or a full employee.

The highest hourly rate is paid to those aged 21 and over, and will increase by 6.7% from £11.44 to £12.21.

8. Hikes to water bills

Water bills could increase by an average of £19 per year between 2025 and 2030, according to the water regulator.

Overall, this would mean a hike of £94 or 21%.

Shockingly, households don't have the right to choose their supplier and it is down to where they live.

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9. Double hit on Inheritance Tax (from 2027)

In one of the most shocking announcements from last year's Budget, the Chancellor revealed that some retirees could lose up to 67% of their pension nest egg to HMRC.

As part of Rachel Reeves’ Budget speech, she declared that unused pension pots will now form part of a person’s estate for Inheritance Tax (IHT) purposes.

With IHT imposed at 40% on all sums above the threshold – £325,000 per person, rising to £500,000 if an estate being passed on includes a primary residence – it’s essential to get planning.

Coming into effect in 2027, the changes will also mean that a beneficiary will be taxed their usual Income Tax rate if someone dies after the age of 75.

While this isn't technically a change for 2025, many of us will need to start planning now. Read our 6 tips to minimise the Budget pension double hit to help you get started.