Dividend, savings and property tax increases
With effect from April 2026, basic and higher rate tax on dividend income increases by 2% to 10.75% and 35.75% respectively, but the additional rate remains at 39.35%.
With effect from April 2027, tax on savings income will increase by 2% so the basic rate will be 22%, higher rate 42% and additional rate 47%.
Also from April 2027, there is to be a new tax rate specific to property income. The basic rate will be 22%, higher rate 42% and additional rate 47%. Finance cost relief will be increased to 22%.
Changes will also be made from April 2027 so that the tax-free Personal Allowance is deducted first against employment, trading and pension income.
For non-residents, the dividend tax credit is abolished from April 2026, so that taxation of their UK dividend income is aligned with UK residents. This may result in an increase in UK tax liability for non-residents with UK dividend income.
Tax thresholds and allowances
The government is extending the freeze on both the Personal Allowance (£12,570) and the higher rate threshold (£50,270) for a further three years to April 2031. The additional rate threshold also remains frozen at £125,140 until April 2031. This will raise an extra £12.4 billion a year by 2031.
The repayment threshold for Plan 2 student loans has also been frozen at £29,385 for three years from April 2027.
The £1,000 tax-free allowances for trading and property income remain unchanged.
