Tax Planning
Tax Rate Changes for Savings, Dividends, and Property Income: What It Means for Investors and Landlords
New income tax rates affecting dividends (from April 2026) and property & savings income (from April 2027) will shift how passive income is taxed — here’s a breakdown with examples.
By NomadicTax Research Team • 5-8 min read • May 6, 2026
## 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](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
| **Savings income** | 6 April 2027 | Basic, higher: 22% & 42%; additional rate 45%. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
| **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](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai)) |
## 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
1. **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.
2. **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.
3. **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](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- 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.