There have been plenty of learnings from a chaotic 2025.
It has certainly been another eventful year for our finances.
From extreme stock market volatility to persistent high inflation, we’ve had no shortage of things to contend with.
But what learnings can we take from these events?
Let’s take a look at seven money lessons we’ve collectively learned as 2025 draws to a close.
1. Tax rises now the norm
In 2025, hikes to Council Tax, Stamp Duty and Capital Gains Tax were among the changes most keenly felt by taxpayers.
In 2026, we will see a sharp hike in Air Passenger Duty, while the tax rates on dividends will also rise.
The year 2027 will bring a 2% tax hike on savings interest and property income, while all pension funds will become liable for Inheritance Tax.
Fast forward to 2028, and hybrid and electric vehicle drivers will start being taxed for every mile they drive, while owners of high-value homes will be subject to a new ‘mansion tax’ charge on top of Council Tax.
In 2029, we’ll see a clampdown on salary sacrifice schemes while the much-maligned stealth tax raid via a personal allowance freeze will be extended not just into this year, but all the way through to 2031.
We might have laboured the point somewhat, but it’s clear that annual tax hikes are now very much the norm.
When you look at it over a slightly longer timeframe, it’s clear we’re seeing a historic transfer of generated wealth from the public to the Government.
Back in 2021, the taxman’s annual take worked out at 33.5% of the nation’s Gross Domestic Product (GDP).
It has increased steadily over the years and currently stands at 36.4% of GDP.
By the end of the decade, the Office for Budget Responsibility expects it to hit an unprecedented 38.3%.
2. Annuities are making a comeback
It’s easy to forget that, up until a decade ago, annuities were effectively the default option for people choosing what to do with their pension pot.
The introduction of pension freedoms in 2015 led to a sudden and dramatic drop off in both the popularity and the rates offered by annuities.
After many years in the wilderness, these products have once again become a viable opportunity for retirees with pots of all sizes.
A key driver has been the sharp rise in annuity rates since 2020.
Back then, rates stood at just 4.71%.
This had increased to 7% by 2024 and reached a high of 7.71% this September.
This means retirees are receiving far more generous incomes in return for handing over some, or all, of their pension funds to an annuity provider.
Another big factor is the changing tax landscape, with many pensions becoming liable for Inheritance Tax from 2027.
Pensions are currently tax-free if a person dies before the age of 75, and taxed at the person's nominal Income Tax rate thereafter.
Once the new system is implemented, any estate where someone dies aged older than 75 could face a double tax raid as their pot is hit with both Income Tax and IHT.
Pete Cowell, head of annuities at Standard Life, believes this could make annuities far more appealing for many retirees, as it would help them to at least avoid the IHT hit.
“Interest in annuities is likely to remain strong, particularly given the anticipated changes to IHT in 2027, which may prompt more people to consider annuities as part of their retirement planning.”
3. Inflation has proved devastatingly stubborn
Back in 2021, after a couple of years of low inflation, prices began spiking as the economy rebounded post-pandemic.
Speaking that Summer as the CPI measure of inflation hit 3.2%, Bank of England Governor Andrew Bailey said high inflation would likely prove “temporary”.
We’ve marked the point at which that speech was given in red on the graph below.
Bailey also cited the Bank’s forecasts, which showed inflation peaking at 4% before falling below the official 2% target as we neared 2025.
As we now know, the Summer of 2021 marked the start of a remarkable high-inflation period, fuelled by the Russian invasion of Ukraine the following year (which Bailey and the Bank would obviously not have factored into their original equations).
In the last five and a half years, inflation has only once dipped below the official target and currently sits at 3.6%.
This prolonged and unexpected period of high inflation has had a devastating impact on household budgets.
Official data shows consumer prices jumped more than 20% between May 2021 and 2024 alone, as people’s incomes and savings plummeted in real terms.
While wages are now rising faster than prices, inflation remains a problem as we head into 2026.
The OBR forecasts it’ll average 2.5% over the course of the year, meaning yet another year of above-target rises is on the cards.
4. Food prices remain a particular concern
No outlay has seen as big an increase in recent years as the weekly grocery shop, and 2025 has been no different.
As mentioned above, inflation is currently 3.6%, but food price rises stand at 4.9%.
And it’s worth stressing that prices have been soaring despite widespread shrinkflation and skimpflation (where the amount of quality ingredients is reduced) tactics being employed in the supermarket aisles.
So the true increase is probably far higher than the price rises we see at the tills.
5. The Government really wants you to invest
Have some money you’ve set aside for the future sitting in a savings account?
Then Chancellor Rachel Reeves has a message for you: “I want more people to be able to benefit from a growing economy and growing stock markets,” she announced in her Budget speech late last month.
In a bid to motivate more people to consider investing their spare funds, the chancellor will slash the tax-free Cash ISA allowance from £20,000 to £12,000 for all under-65s in 2027.
At the same time, she will hike the rate of Income Tax to be paid on traditional savings by 2%.
Following on from this, the financial watchdog has announced plans to allow financial firms to make financial suggestions to their customers, rather than outright advice.
Such suggestions could include considering investing if most of their funds are held in cash savings.
6. A golden year for investing
If the chancellor was looking to get more people interested in investing, she could do worse than simply holding up a graph showing the price of gold across 2025.
As we wrote in our money winners and losers of the year article, anyone who purchased gold at the start of the year is probably sitting on a 60% profit right now.
And while silver might be a less popular investment choice, it has seen even sharper increases of close to 80% during 2025.
Despite having a deserved reputation as a stable investment, the metals enjoyed a highly unusual year as values skyrocketed on the back of soaring demand from investors seeking shelter from stock market volatility.
7. Petrol and diesel cars still in demand
As things stand, carmakers will be banned from selling new petrol and diesel motors in the UK from 2030 (hybrid models will be outlawed in 2035).
Despite this ban now looming on the horizon, cars with internal combustion engines (ICE) are actually getting more popular.
A recent survey from consultants Ernst & Young found that more than two in five (41%) motorists planning to buy a car would prefer an ICE model over an electric or hybrid model.
When the consultants conducted the same survey in 2024, that figure stood at 36%, meaning demand is higher now despite being one year closer to the ICE ban.
While we don’t want to read too much into one survey, it’s worth noting that it was conducted before the Budget was delivered in late November.
This contained an announcement that both electric (EV) and hybrid car owners would soon face a hefty new tax.
Starting in April 2028, EVs will face a 3p tax for every mile driven, while hybrid vehicles will attract a 1.5p-per-mile charge.
The move will make owning such vehicles less attractive, both now and when the new levy kicks in.
The official spending watchdog, the Office for Budget Responsibility, estimates the change will result in 440,000 fewer EVs being bought over the next five years.
This will, in turn, mean higher demand for petrol and diesel vehicles, both new and used.