What is changing
From 6 April 2027, the UK will apply higher Income Tax rates to savings income and property income. The announced rates are 24% for the basic rate, 44% for the higher rate and 49% for the additional rate. The property rates apply to individuals and partnerships receiving rental income, while the savings rates apply to interest and other savings income. Trust and personal-representative rates are also affected.
The main employment and pension income rates remain separate. This means that two taxpayers with the same total income may face different marginal rates depending on whether the income comes from employment, savings or property.
Example: a higher-rate landlord
Suppose a landlord receives £20,000 of taxable rental profit in a year and is already a higher-rate taxpayer because of employment income. Under the new property-income rate, the additional tax attributable to that rental profit could be calculated at 44%, before considering deductible expenses, reliefs or other applicable rules. The landlord should not assume that the tax treatment will remain aligned with ordinary employment income.
A landlord should review:
- Mortgage-interest restrictions and the resulting tax-credit mechanism.
- Allowable repairs, professional fees and insurance costs.
- Whether property ownership between spouses or civil partners reflects the intended beneficial ownership.
- Whether the commercial and tax consequences of incorporation have been properly modelled.
Example: a saver with substantial interest
A taxpayer earning £10,000 of taxable bank interest may see a higher liability from 2027 if the income falls within the basic, higher or additional savings rate. Tax-efficient wrappers, including ISAs, become more valuable where they are suitable for the investor’s objectives and risk profile.
However, tax planning should not be driven solely by the rate. Investors should consider access, investment risk, charges, contribution limits and whether moving assets creates a Capital Gains Tax liability.
Practical planning steps
- Separate income streams in forecasts: employment, dividends, rent, interest and pension income.
- Estimate 2027 liability using expected taxable income rather than gross receipts.
- Review ISA usage before the relevant tax-year deadlines.
- Check property records, including expenses and ownership documentation.
- Revisit trust distributions and tax-pool calculations with professional advice where relevant.
The changes are announced measures and should be tracked through Finance Bill legislation and later HMRC guidance. A forecast prepared before 6 April 2027 can help prevent an unexpected balancing payment or underpayment.