Tax Planning
Tax Planning under UK Budget 2025: How to Prepare for the Incoming Rates & Allowance Shifts
Budget 2025 heralds changes in property, savings, and dividend tax rates—plus a new High-Value Council Tax Surcharge and threshold freezes. Here’s how to plan ahead.
By NomadicTax Research Team • 5-8 min read • April 6, 2026
## Key Budget 2025 Measures to Know
- **Royal rates on property income** will increase: from April **2027**, basic rate becomes **22%**, higher rate **42%**, and additional rate **47%**.([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- **Dividend income** rate increases of **2 percentage points** from **April 2026**, for basic and higher rate taxpayers.([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- Savings income also sees a **2 point rise** across all bands starting **April 2027**.([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- New **High Value Council Tax Surcharge (HVCTS)** on residential properties worth **£2 million+** (England) from **April 2028** – annual surcharge rising with property value.([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- Freeze on income tax thresholds until **April 2030-31**, meaning growing tax liabilities via **fiscal drag**.([en.wikipedia.org](https://en.wikipedia.org/wiki/November_2025_United_Kingdom_budget?utm_source=openai))
## Planning Strategies
- **Reassess investment portfolio**: Income in dividends, savings or rental property will bear higher tax; consider shifting into ISA wrappers or reallocating into options with more favorable tax treatment.
- **Optimize rental property ownership**: Consider using companies vs personal ownership, or restructuring to reduce tax burdens on property income.
- **Time large gains or dividends**: If you expect big payouts, see if deferring until post rate change (after April 2026 or 2027) or using loss reliefs helps.
- **Reprice high value property investments / gifts** ahead of HVCTS implementation.
- **Review tax efficient vehicles** now: pensions, ISAs, EIS/SEIS for entrepreneurs etc., before rates increase.
- **Offset fiscal drag effects** by using any available allowances, reliefs, or splitting income (e.g., through spouse, trusts).
## Examples
- **Alex**, a higher rate taxpayer with rental income of £30,000/year: under budget 2027 rates, the tax increase could mean a jump from, say, 40% to 42% on property income—meaning hundreds of pounds more tax liability. Alex might switch some properties into a limited company or reduce costs to lower taxable profit.
- **Sara**, dividends investor with modest savings income: with upcoming 2% increase, she may want to allocate more into ISAs or increase use of pension contributions to shelter income.
## Watch Points
- **Legislation schedule**: Some changes (dividends, savings, property rates) start 2026-27 or 2027-28—plan now ahead of effective dates.
- **Scotland/Wales devolved tax rules**: Property income rates in England and Northern Ireland set centrally; devolved governments may set different rates.
- **Annual allowances and reliefs may erode in value** under threshold freeze. Inflation will push people into higher rates unless allowances rise.
---
**Bottom line**: if you hold assets, collect dividends or have property income, UK’s Budget 2025 calls for more active tax planning. Getting ready for rate rises, leverage allowances, use legal entities where helpful, and make use of transition windows to minimize shocks.