HMRC has confirmed a tax change that could see UK households forking out £225 annually. The Government is changing Income Tax rates for property and savings income, affecting individuals and partnerships with property letting income, people earning interest from savings, and trustees of trusts and personal representatives of deceased individuals who receive property or savings income.
New rates and estimated impact
HMRC estimates that approximately 5% of taxpayers will see an average tax rise of £225 annually in 2027 to 2028 as a result of the increase in property rates. Around 12% of taxpayers will see an average tax rise of £113 annually in 2027 to 2028 due to the increase in savings rates, officials believe.
The Government adds that a basic rate taxpayer making full use of the Starting Rate for Savings and the Personal Savings Allowance would need more than £150,000 in savings — held outside an ISA — paying 4% to start paying tax on interest. The new rates will be activated in April 2027.
Property and savings rate breakdown
For property rates, the new levels will be: 24% for the property basic rate, 44% for the property higher rate, and 49% for the property additional rate and property trust rate.
For savings income, the new rates will be: 24% for the savings basic rate, 44% for the savings higher rate, and 49% for the savings additional rate and savings trust rate.
Officials say: "The government is increasing rates of tax on savings and property income to support its commitment to fiscal discipline and ensure measures to support households and businesses are fully funded."
Long-term effects and administration
It is estimated that by 2031 to 2032, 2.4 million landlords (5% of taxpayers in 2031 to 2032) will face changes in tax as a result of the property tax change.
HMRC says: "Administratively, this measure will affect individuals (including partners in partnerships) with profits from property rental income. It is anticipated that both the one-off and ongoing administrative burdens for these individuals will be negligible. The only one-off costs will be familiarisation with the change. No ongoing costs are expected, as there will be no additional information requirement."
The Government added: "It is estimated that by 2031 to 2032, those with savings income above the relevant tax-free allowances, 6 million individuals (13% of taxpayers in 2031 to 2032), will face an increase in tax as a result of this measure. They will not need to do anything differently but will need to be aware of the change. However, most taxpayers are not liable to tax on their savings income, and the majority of those who are liable to tax, have the tax deducted automatically through PAYE."
