The Chancellor announced increases to tax for property, dividend and savings income.
The process for reporting and paying tax will remain unchanged, only tax rates will be affected.
The Changes
- From 6 April 2026 the rates of tax payable on dividend income will increase by 2 points across the basic rate band (from 8.75% to 10.75%) and the higher rate band (from 33.75% to 35.75%). The additional rate band will remain unchanged at 39.35%.
- From 6 April 2027, tax on savings income will increase by 2 percentage points across all tax rate bands increasing the basic rate to 22%, higher rate to 42% and the additional rate to 47%.
The starting rate band for savings will remain at £5,000 until April 2031.
- From 6 April 2027 new separate tax rate bands will be introduced for property income, which will be taxed at a rate of 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers.
For comparison of the changes, under the current rules, an individual with a gross annual salary of £70,000 would pay just under £19,000 in combined PAYE and NIC, whereas a landlord with rental profits of £70,000 pays income tax only of around £13,000. Under the proposals the landlord’s tax liability would increase by over £1,000.
Tax reliefs and deductions
Currently, the ordering in which tax reliefs can be applied to income is flexible, potentially reducing the tax burden depending on the income sources. Without changes it would be possible to claim the deduction or relief from savings and rental income, which would otherwise be taxed at higher rates than non-savings income. From 6 April 2027 deductions must first be applied against non-savings income (e.g., salary, self-employment profits). If any relief remains, it can then be applied against savings income and finally against dividend income.