Savings and property income tax to rise to 24%, 44% and 49%

Budget 2026 raises income tax on savings and property income by a further two percentage points from 6 April 2027. Interest and rental profits will be taxed at 24% in the basic rate band, 44% in the higher rate band and 49% in the additional rate band. Tax on wages, pensions and dividends does not change. For practices this is the measure most likely to change the January tax bills of landlord clients and of clients with large cash savings.

What was announced

Budget 2025 had already separated property income from other income and set its own rates, and raised the savings rates, both from April 2027. Those rates were 22%, 42% and 47%. Chancellor John Healey’s first Budget adds another two points from the same date, so the rates that will actually apply in 2027-28 are:

The 2027-28 rates are the same for savings income and property income.

In 2026-27 property income is still taxed at the main rates, and savings income at the savings rates of 20%, 40% and 45%. The bands themselves are unchanged: the basic rate band is still £37,700 and the additional rate threshold £125,140, with the £12,570 personal allowance frozen.

The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland, and the Treasury says the Scottish and Welsh governments have been given the ability to set property income rates in line with their existing income tax powers. Scottish landlords should therefore wait for the Scottish Budget before assuming the figures above.

Dividends are left alone. The dividend ordinary, upper and additional rates stay at 10.75%, 35.75% and 39.35% for 2027-28, and the dividend allowance stays at £500. The Chancellor said in his speech that there was “no change to tax on income from dividends and no change to tax on income from employment”.

What stays the same for savers

The allowances that keep most savers out of tax are unchanged in 2027-28:

• the Personal Savings Allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers
• the 0% starting rate for savings on up to £5,000 of interest for people with low other income
• the £20,000 ISA subscription limit

The government had planned to cut the cash ISA limit for savers under 65 from April 2027. That has been dropped: the cash ISA limit stays at £20,000 for all savers over 18. The Treasury will also work with the industry on a new incentive for people investing in a stocks and shares ISA for the first time, with the design still to be agreed.

The Budget document says a basic rate taxpayer would need more than £25,000 of savings outside ISAs before paying any tax on interest, and someone who also qualifies for the starting rate could hold up to £150,000.

Worked examples

These examples assume the personal allowance is already used by other income and ignore other reliefs.

Higher rate saver. A client has £10,000 of taxable interest above their £500 Personal Savings Allowance. In 2026-27 the tax is £4,000 at 40%. In 2027-28 it is £4,400 at 44%.

Basic rate landlord. A client has £15,000 of rental profit, all within the basic rate band. In 2026-27 the tax is £3,000 at 20%. Under the Budget 2025 plan it would have been £3,300 at 22% in 2027-28. After Budget 2026 it is £3,600 at 24%.

Finance cost relief for landlords

Mortgage interest on residential lets is not deducted from rental profit. Instead landlords get a tax reduction at the basic rate under the section 24 rules. The Treasury’s policy costings say finance cost relief will continue to be aligned to the property basic rate, so it follows the property basic rate of 24% in 2027-28 rather than staying at 20%. Higher and additional rate landlords still lose relief on the difference between that rate and their marginal property rate. See our guide to section 24 mortgage interest relief for how the calculation works.

Who pays and how much it raises

The Budget document says 84% of income tax payers will be unaffected by the savings and property changes, and that around half the revenue will come from the top 10% of households. The policy costings put the yield of this year’s further increase at £555 million from savings and £575 million from property income in 2028-29, the first full year of receipts.

HMRC has also published a technical note covering the knock-on changes. From 6 April 2027, chargeable event certificates from insurers will refer to the savings basic rate, and tax deducted at source from purchased life annuities and certain UK public revenue dividends will be at the savings basic rate. The transfer of assets abroad rules are also adjusted so income that has already borne the new rates is not taxed twice.

What it means for accountants and their clients

Bills arrive later than the rate change. For clients in Self Assessment, payments on account for 2027-28 are based on the 2026-27 bill, so much of the increase will fall into the balancing payment due on 31 January 2029. Clients with rising rental or interest income should be warned now so the extra tax is not a surprise. Our payments on account calculator shows how the instalments are worked out.

Savings planning matters more. With higher rate savers losing 44p of each pound of taxable interest from April 2027, the usual tools are worth revisiting: using ISA allowances in full, pension contributions, and holding savings in the name of the spouse or civil partner with unused allowances or a lower rate band. See our guide to income tax on savings and to ISA tax benefits.

Incorporation questions will come back. The gap between personal property rates and corporation tax widens again. The Treasury expects only a limited move to incorporation, and incorporating a portfolio can trigger capital gains tax and stamp duty land tax, so it is rarely a quick win. Our guide to whether landlords should incorporate sets out the trade-offs.

MTD timing overlaps. Landlords with qualifying income over £30,000 must use Making Tax Digital for Income Tax from 6 April 2027, the same day the new rates start. Read the MTD update from Budget 2026 for the penalty easement that applies in the first year.

For the wider picture for landlords, including the council tax surcharge and property data reporting, see Budget 2026 for landlords.

Frequently asked questions

When do the new savings and property income tax rates start?

They apply from 6 April 2027, for the 2027-28 tax year onwards. In 2026-27 savings income is taxed at 20%, 40% and 45%, and property income at the main income tax rates.

Do the higher rates apply in Scotland and Wales?

The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland, and the Scottish and Welsh governments have been given the ability to set property income rates in line with their existing income tax powers.

Are dividends taxed more after Budget 2026?

No. The dividend rates stay at 10.75%, 35.75% and 39.35% in 2027-28, and the dividend allowance stays at £500.

Is the cash ISA limit being cut?

No. The government has decided not to reduce the cash ISA limit, so it stays at £20,000 a year for all savers over 18.