What will be dearer or more expensive in 2025? We reveal all.
2024 hasn’t been an easy year on the finances.
So what could 2025 have in store for the cost of items such as groceries, council tax, energy bills and transport costs?
We take a look at what this could mean for your money next year.
What will be cheaper?
Draught beer cut in price
The good news for anyone looking to enjoy a quiet pint in 2025 is that duty on a pint of draught beer and cider was cut by the new Labour Government in the recent Budget by 1p per pint, or 1.7%.
However, if bottled beer, wine and spirits are more your tipple, you may be disappointed as the duty on this will increase in line with inflation next year.
Energy prices will rise, then fall
Energy bills are due to increase in the new year as the energy price cap is set to rise again in January.
Between January and March 2025, the energy price cap, which is set by the regulator Ofgem, will rise to £1,738 for a typical household that pays for dual fuel (gas and electricity) by direct debit.
This is up 1.2% from £1,717 between October and December 2024 and an increase of £21 a year for the average household.
However, the good news is that energy consultancy Cornwall Insights believes that energy prices will fall slightly in the second and fourth quarters of 2025.
Petrol and diesel prices to fall
Fuel prices are currently at a three-year low, according to data from the RAC. It currently costs around £77 to fill up a family car with diesel and around £74.40 to fill up one with petrol.
Chancellor Rachel Reeves left fuel duty frozen until 2026 in the recent Budget. Meanwhile, the World Bank has also forecast that petrol and diesel prices will fall over the next two years due to a glut in oil production.
The bank says that this is due to falling consumption in China, the move to cleaner energy and that it will happen even with the ongoing conflict in the Middle East.
What will be more expensive?
Council tax bills set to rise
On the downside, council tax looks set to go up in 2025. Local authorities have been given the go ahead by the Government to raise core Council Tax by 3% and the adult social care precept by 2% for 2025 to 2026.
So this means that many council taxpayers will be looking at an above-inflation hike in bills next year – averaging around £106 more per year for Band D council taxpayers.
Under the current cap, local authorities are only allowed to increase bills by up to 5% without getting permission from the Government or holding a local referendum on the issue.
Many local authorities are currently struggling with finance or debt problems and have had to cut back on many essential local services.
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Water bills will be more expensive
Millions of households in England and Wales may be unimpressed to see their water bills increase next year, considering the poor performance of many of the water companies in 2024.
Indeed, Thames Water found itself on the brink of bankruptcy earlier this year until it secured £3 billion in new funding.
Leaky pipes and years of neglect of the infrastructure has led to flooding, polluted rivers and customers being left without safe drinking water in some instances.
Yet Ofwat, the water regulator, has provisionally agreed to bills rising by an average of £19 per year between 2025 and 2030, which represents a 21% increase.
Water companies say they need the price hikes to fix problems in the water infrastructure.
Grocery and goods prices could rise
Following months of high inflation during the cost of living crisis, consumer goods have finally fallen in price this year.
Consumer price inflation came in at an annualised rate of 2.6% in November, according to data from the Office of National Statistics, up from 2.3% in October but still well down from its peak of 11.1% in late 2022.
Food prices are 0.6% lower than the same time last year and non-food items are down by 1.8% in the same period, which is good news for hard-pressed households.
The World Bank recently predicted that global food prices should continue to fall over the next two years – a knock-on effect of falling oil prices.
However, a handful of other factors could lead to higher inflation and goods prices rising again. Donald Trump is set to re-enter the White House for his second presidency next year.
Trump campaigned on his intention to introduce widespread trade tariffs on goods imported into the US, including 60% on those from China and 20% on goods from other countries.
Unfortunately, despite the so-called ‘special relationship’, the UK is not immune from these tariffs either, although Prime Minister Keir Starmer and Foreign Secretary David Lammy are reportedly working to mitigate the effects.
The increase in National Insurance paid by employers could also raise prices on goods, groceries and services as companies seek to pass on these costs to the consumer.
Employer National Insurance payments are set to rise from 13.8% to 15% from April next year, while companies will also have to make payments on employee income thresholds of £5,000 rather than the current £9,100.
Rail fares to increase
Harried commuters may be disappointed to find that regulated rail fares are due to go up by 4.6% from March 2025. This is the second above-inflation hike in 12 years.
Transport for London fares are also expected to rise by the same figure, although this has not yet been confirmed.
Rent and house prices could rise
The Bank of England has hinted that it may make further interest rate cuts next year, which could come as a relief to homeowners and those seeking to get on the housing ladder.
According to data from the Treasury, City forecasters predict house prices will rise by 3.9% in 2025, while more independent forecasters expect a more moderate rise of 2.5%.
Meanwhile, demand continues to outstrip supply in the private rentals market, which could push rents up by 3-4% in 2025, says the property company the Leaders Romans Group.
Nevertheless, the forthcoming Renters Rights Bill, which comes into force in 2030, will outlaw bidding wars on rental properties and limit rent rises to once a year.