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Budget 2026 announced further increases to the Income Tax rates applying to savings and property income from 6 April 2027. The Government has also confirmed changes to the way Payments on Account will operate for Self-Assessment taxpayers from April 2029.
1. Higher rates for savings and property income
From 6 April 2027, the Income Tax rates applying to savings and property income will increase to:
- 24% at the basic rate;
- 44% at the higher rate; and
- 49% at the additional rate.
By comparison, the main rates applying to employment, pension and trading income will remain at 20%, 40% and 45%.
The increases build on changes announced previously. Savings and property income rates had already been due to rise to 22%, 42% and 47% from April 2027. Budget 2026 therefore adds a further two percentage points to each rate before the new regime takes effect.
The effect will depend on an individual’s circumstances, including the amount and type of income they receive and the availability of relevant allowances. However, those with significant savings or property income may wish to review the impact of the higher rates ahead of April 2027.
2. Changes to Self-Assessment Payments on Account
Budget 2026 also confirmed a longer-term change to the timing of Self-Assessment tax payments.
Currently, taxpayers within the Payments on Account regime generally make two advance payments, on 31 January and 31 July, based on the previous year’s liability, with any balancing payment due the following 31 January.
From April 2029, Payments on Account will instead be made in smaller, more frequent instalments during the tax year. The change affects when tax is paid rather than the amount ultimately due, and the existing 31 January deadline for filing Self-Assessment tax returns will remain.
There will be transitional arrangements in 2029/30 as taxpayers move from the existing system to the new one. Further details, including the frequency and mechanics of the new payments, are still to be confirmed.
3. What do the changes mean for taxpayers?
The higher savings and property income rates take effect considerably sooner than the changes to Payments on Account.
Individuals with significant savings income will be affected. Although the impact will depend on the availability of allowances and the nature of the investments held, taxpayers may wish to consider the effect of the higher rates on their investment income ahead of April 2027.
The increase to the property income rates will be particularly significant for individuals holding rental properties personally. For some landlords, the changes may lead them to reconsider how their property investments are held. Corporate ownership may appear attractive given the lower rates of Corporation Tax and preferential tax treatment of finance costs. However, the comparison between individual and corporate ownership of buy-to-let properties is not straightforward as tax may also arise when profits are extracted from the company, and transferring an existing property portfolio into a company can itself trigger Capital Gains Tax and Stamp Duty Land Tax.
If you would like to discuss how these changes could affect your tax position, please contact a member of our Tax, Trusts & Succession team.