Tax Planning
How the 2025 UK Budget’s Tax Shifts Impact Savers, Investors & Landlords
Budget 2025 introduces higher tax rates on dividends, savings and property incomes—core revenue for many non-employment income earners—and creates both challenges and planning opportunities.
By NomadicTax Research Team • 5-8 min read • February 22, 2026
## What changed in Budget 2025 for non-employment income?
The government has announced increases in tax rates on three key income sources: **dividends**, **savings interest**, and **property income**. These changes are intended to make the tax system more fair, reducing the favourable tax treatment of non-labour income compared to employment income. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
| Income type | Change | Effective Date |
|---|---|---|
| Dividends (ordinary & upper rates) | **+2 percentage points** | From **6 April 2026** ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
| Property income (basic, higher, additional rate) | **+2 percentage points** | From **6 April 2027** ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
| Savings income (all rates) | **+2 percentage points** | From **6 April 2027** ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
## Who will feel the impact most?
- **Investors and shareholders**: Even those who receive small dividend incomes may be affected if they fall into upper or additional rate bands.
- **Property owners/landlords**: Those with rental income above allowance thresholds will pay more in tax from 2027.
- **Savers**: Individuals with taxable savings interest above personal savings allowance will see their tax liability rise significantly. The personal savings allowance stays the same, which accentuates the burden for those taxed at higher rates. ([gov.uk](https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
## Planning tactics to consider now
- **Maximise use of ISAs**: Interest and dividends in ISAs remain tax-free—even after rate increases. If you can move some investments into ISAs, do so.
- **Review asset location**: For investments outside ISAs, dividend income hitting the increased rates may require reviewing how assets are held (e.g. via corporation vs personal ownership).
- **Delay disposals if timing helps**: Property income increases don’t kick in until April 2027; dividend increases come earlier (April 2026). If possible, realization of gains or extra dividends might be timed before April 2026 to benefit from lower rates.
- **Property expenses and deductions**: Organise accounts to ensure all allowable expenses are claimed, consider the impact of these changes on net rental income.
## Cross-effects with Making Tax Digital
If you're in scope for Making Tax Digital (MTD) from April 2026 (i.e. £50,000+ gross income from self-employment or property), these income sources will need to be reported digitally, quarterly. That means:
- You’ll need accurate data throughout the year—not just at year-end.
- Record keeping for income from property becomes more important—daily/weekly rent receivable, allowable deductions, maintenance, etc.
- Estimating tax liabilities early becomes more feasible—and necessary—for cash flow planning.
## Example scenarios
**Example 1: Dividends**
Sarah receives £3,000/year in dividends plus other income. Under current rules (before April 2026), she’s taxed at existing ordinary/upper dividend rates. After 6 April 2026, those rates increase by 2pp. If she’s a higher-rate taxpayer, that means paying more tax on her dividends—even if amounts stay the same.
**Example 2: Property owner**
James is a landlord with gross rental income of £60,000/year and tax deductible expenses of £20,000. His net rental profit falls into the higher rate band. From April 2027, property income tax rates increase—he will pay more tax on the same income (net) due to higher marginal rates.
## What to do now
- Forecast how the increased rates will affect your annual tax bill under various income scenarios.
- Diversify income sources where possible (e.g. earning via employment or limited company) to optimise marginal gains.
- Ensure your records are kept clean—especially as MTD requirements will apply. Errors in reporting property, dividend, or savings income could become more visible.
- For asset disposals, consider whether selling before 6 April 2026 (for dividend income) makes sense; after that date, marginal rates are higher.
## Final thoughts
The Budget 2025 tax changes mark a shift towards **equalising the tax burden** between labour and non-labour income in the UK. For investors, landlords, and savers, this means being proactive. Know when rate changes apply, align your financial and tax planning accordingly, and get ahead—especially in terms of digital reporting via MTD if you're affected. With foresight, you can minimize costs and position yourself for the new tax environment effectively.