The UK government has announced four important changes to tax payments and benefits, set to take effect in April 2025. These changes, introduced by HM Revenue and Customs (HMRC), will affect millions of households across the country. The key updates include:
- The end of Tax Credits and the move to Universal Credit
- An increase in Child Benefit payments
- A higher threshold for the High Income Child Benefit Charge (HICBC)
- Higher interest rates on late tax payments
With these updates, some households may see financial benefits, while others could face new challenges. Read on to understand how these changes will affect you and how to prepare.
1. Tax Credits Will End – Universal Credit Takes Over
Starting from April 5, 2025, Working Tax Credit and Child Tax Credit will no longer exist. The government has decided to merge all major benefits into Universal Credit (UC) to simplify the system.
- Who is affected?
If you are still receiving tax credits, you must apply for Universal Credit before the deadline. Those who do not transition in time risk losing their financial support. - Will you receive the same amount?
Most people will receive the same or higher benefits under Universal Credit. However, some individuals might get less. To prevent sudden income loss, HMRC is offering transitional protection, ensuring no one faces an immediate drop in payments. - What should you do?
If you haven’t already moved to Universal Credit, check your eligibility and apply before April 2025.
2. Child Benefit Payments Will Increase
Families receiving Child Benefit will see an increase in their payments from April 6, 2025.
- New weekly payment rates:
- First child: £28.14 (up from £25.60)
- Each additional child: £18.65 (up from £16.95)
- Why is this happening?
The government is increasing payments to help families cope with the rising cost of living. This is part of an effort to provide more financial support to parents.
3. High Income Child Benefit Charge (HICBC) Adjustments
The High Income Child Benefit Charge (HICBC) is a tax applied to households where one parent earns above a certain amount. From April 2025, the threshold for this charge will increase.
- Current rule:
- The charge currently applies if one parent earns more than £50,000 per year.
- For every £100 earned above this, 1% of the Child Benefit is deducted.
- New rule (April 2025):
- The threshold will increase to £60,000.
- The benefit will be completely removed at £80,000 (previously £60,000).
- What does this mean?
- If your income is between £50,000 and £60,000, you will now keep your full Child Benefit.
- This change benefits middle-income families, reducing the amount they must pay back to HMRC.
4. Late Payment Interest Rates Will Increase
From April 6, 2025, HMRC will raise the interest rates on unpaid tax.
- What’s changing?
- Currently, interest on late payments is Bank of England base rate + 2.5%.
- From April, this will increase to Bank of England base rate + 4%.
- Who does this affect?
- If you have outstanding tax bills, you will need to pay higher interest if you delay your payments.
- This change will mostly impact self-employed individuals and businesses that owe unpaid tax.
- How to avoid extra charges?
- Make sure you pay your taxes on time.
- If you’re struggling, you can set up a payment plan with HMRC.
How to Prepare for These Changes
To avoid financial problems, it is important to act now. Here’s what you can do:
- If you receive Tax Credits, check if you qualify for Universal Credit and apply before the deadline.
- If you receive Child Benefit, confirm whether you will receive more money under the new rules.
- If you earn over £50,000, check whether the HICBC changes benefit you.
- If you have unpaid taxes, pay them before April 2025 to avoid higher interest rates.
Final Thoughts
These four HMRC changes will impact millions of UK households. While families with children may benefit from higher Child Benefit, those relying on Tax Credits must take action before they expire. At the same time, higher late payment interest rates will make unpaid taxes more expensive.
By staying informed and taking early action, you can avoid financial problems and take advantage of the new rules.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
