New Rates on Dividends, Savings & Property Income
As part of the Autumn Budget 2025, the UK government introduced changes in how dividends, savings income, and property income are taxed. These take effect in phases:
| Income type | Effective from | Key change |
|---|---|---|
| Dividends | 6 April 2026 | Ordinary (basic) rate rises from 8.75% to 10.75%; upper rate rises from 33.75% to 35.75%; additional rate holds at 39.35%. (gov.uk) |
| Savings income | 6 April 2027 | Basic, higher: 22% & 42%; additional rate 45%. (gov.uk) |
| Property income | 6 April 2027 | Separate property income rates: basic 22%, higher 42%, additional 47%. Applies in England, Wales & Northern Ireland initially, with consultation for Scotland & Wales in devolved frameworks. (gov.uk) |
Why These Matters Affect You
- If you rely significantly on investment income, you’ll want to compute your exposure to higher rates.
- Landlords can expect higher taxes on profits (after expenses), especially once the property rates apply.
- People with mixed income sources need to understand which rate bands their portfolios fall into.
- Planning becomes essential: dividends taken in early 2026 may be taxed at the lower former rates. Delay might cost.
Example Scenarios
-
Susan invests in dividend-paying stocks: She earns £5,000 dividends in mid-2026 as a basic-rate taxpayer. Under old rate: 8.75% ⇒ £437.50 tax. Under new: 10.75% ⇒ £537.50. A difference of £100 in just one year.
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Mark is a landlord: Net profit of £20,000 from a property in 2027-28. Property income rates apply at 22% ⇒ tax ≈ £4,400. Under previous unified rate (20%), tax would have been £4,000 — an extra £400 of liability.
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Emma holds savings and earns interest: Savings fall under the savings income band in 2027-28, taxed at 22% basic rate for most — many used to enjoy personal savings allowances and minimal tax issues. With rate rise, consider whether to hold interest-bearing assets via ISAs or other tax-privileged structures.
Planning Tips You Can Use
- Front-load dividends: If you expect to be in basic or higher rate, declaring dividends before 6 April 2026 may lock in previous, lower rates.
- Rebalance portfolio: Shift towards tax-efficient investments (e.g. ISAs) especially savings and fixed income that would be hit by higher savings rates.
- Landlord expense tracking: Keep detailed records of allowable costs so taxable property profits are minimized.
- Evaluate timing of new property income rate: If possible, make capital improvements or deal with significant expenses in the year before the rate hike.
- Use allowances wisely: Dividend Allowance (£500) and personal savings allowances are still in place—plan around them.
Interaction with Other Tax Policy (e.g. MTD)
- The new rates work alongside Making Tax Digital commitments. Landlords & sole traders are already dealing with digital filings/quarterly updates. Knowing future rates helps plan digital-recorded transactions accordingly. (gov.uk)
- Loss allowances, reliefs and property expense deductions still apply — digital records will ensure accuracy and evidence when rates rise.
Bottom Line
If you’re an investor, landlord, or someone receiving passive income, the new taxation landscape means increased rates, higher scrutiny, and a greater need for documented compliance. The sooner you adjust strategies — whether by timing income, using eligible structures, or embracing efficient digital recordkeeping — the better off you’ll be when the changes land.