Tax Planning
Planning Ahead: Tax-Efficient Strategies Under New Asset Income Rates
With tax rates rising for dividends, savings, and now property income, UK taxpayers with investment or rental income face new challenges—and opportunities.
By NomadicTax Research Team • 5-8 min read • June 24, 2026
## Key Changes to Asset Income Tax Rates
From the **Budget 2025 announcements**, significant tax changes take effect:
- **Dividend ordinary rate** increases from 8.75% to **10.75%**, **upper rate** from 33.75% to **35.75%** from **April 6, 2026**. The additional rate remains at 39.35%.([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
- **Savings rates** for basic, higher, and additional rate taxpayers will each rise by **2 percentage points**, effective **April 2027**.([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
- **Property income** will have its own tax rate bands—22%, 42%, and 47%—from **April 2027**, matching the general income rate bands. Also, the order in the calculation of taxable income shifts so property income sits before savings and dividends.([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
## Tax-Planning Opportunities & Pitfalls
**What to watch out for**:
- Passive income like dividends or rental profits will now be taxed **more heavily**, sometimes earlier in the income hierarchy, increasing overall liability.
- Reliefs and allowances will be applied first to “non-property, non-savings, non-dividend” income. This may leave less room for allowances against asset income.([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note?utm_source=openai))
- For landlords, finance cost relief (e.g. mortgage interest) will be limited to property basic rate (22%) rate once separate property rates take effect.([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note?utm_source=openai))
**Possible planning strategies**:
- Use **tax-free wrappers**: ISAs, pensions, etc., to shelter dividend and savings income.
- Consider **timing distributions**: If you expect to drop into a lower rate this year (e.g. by reducing taxable non-asset income), defer dividend payments.
- Rental portfolio structures: high-cost property finance and management expenses could be timed before changes take full effect.
- Splitting ownership or using joint ownership may help in aligning income to lower brackets.
## Example Scenarios
**Scenario 1**: Emma earns £60,000 employment income + £5,000 dividends. Under the new rates, instead of paying 8.75% on dividends, she pays **10.75%** from April 2026. Small change in overall tax, but adds up over multiple income sources or for higher amounts.
**Scenario 2**: Mark is a landlord with rental income after expenses of £40,000 and a mortgage interest bill of £10,000. When property incomes get their own rates in April 2027, he will receive finance cost relief at only **22%**, rather than potentially mixing with higher rates for his total income. This heightens the importance of maximizing deductions and expense claims now.
## What You Should Do Now
1. **Review your investment portfolio** to understand how much of your income is from dividends, savings, or property.
2. **Maximise tax-efficient accounts** — ISAs, SIPPs, etc.
3. **Reconsider distributions** of dividends, if you have control (e.g. via a private company).
4. **Landlords**: Examine property finance costs, consider accelerating repairs or maintenance in advance, ensure you claim all allowable expenses.
5. **Seek advice** sooner — rather than later — especially if you expect income close to higher-rate thresholds.
These changes aim to reduce the gap between how income from work and income from assets is taxed. With thoughtful planning, you can limit surprise tax bills and make efficient use of allowances before new rules take full effect.
## Sources
- Technical note: Changes to tax rates for property, savings & dividend income ([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
- Budget 2025 overview (OOTLAR) section on property income rates and dividend changes ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))