Overview of the Changes
Starting 6 April 2026:
- Dividend rates rose: ordinary rate is now 10.75% (was 8.75%), and upper rate is 35.75% (was 33.75%) for dividend income. (gov.uk)
- Property income rates increase from the 2027-28 tax year: basic will go to 22%, higher rate to 42%, additional to 47%. Savings income similarly shifts. (gov.uk)
Who Is Affected Most
- Shareholders and investors who receive dividends from UK companies.
- Landlords and property owners: those earning rental income or investing in real estate funds.
- People with income from savings or investments: bank interest, bond yields etc.
Also, estates of deceased persons follow same new property-and-savings rates. (gov.uk)
Examples to Illustrate
Example 1: Dividend Income
You receive £5,000 dividends. Previously taxed at 8.75% → you paid ~£437.50. Now at 10.75% → you’ll pay £537.50. That’s an extra £100 in tax.
Example 2: Rental Profit for a Higher-Rate Taxpayer
From April 2027-28: you have £20,000 rental profit. Under current rates you’re taxed at 40%. From next tax year it will be 42% on basic-rate portion or higher rates. Depending on banding, this could cost hundreds more.
What You Can Do to Plan Ahead
- Consider timing income and dividend payments: capturing dividends before or after rate changes depending on your marginal rate.
- Use reliefs and allowances efficiently: for example, allocate investments across spouses to benefit from lower thresholds or allowances.
- Review holding structure: e.g., use of trusts, if applicable, to manage distributions.
- For property owners: check whether certain costs and financing arrangements (like interest relief) are optimised.
The Savings Rate Freeze and Allowance Order Changes
The starting rate for savings remains at £5,000 through to 2030-31. (legislation.gov.uk)
Moreover, Finance Act changes also alter order of applying reliefs and allowances, so general allowances are used against “other” income before savings, property, or dividends. (gov.uk)
Action Checklist
- Confirm your dividend income profile and project increased tax liability.
- Adjust your financial planning: consider reinvestment vs withdrawal.
- Property owners: estimate the impact of rate rises starting 2027-28 and explore whether costs/savings can be brought forward.
- Discuss with a tax professional whether your investment mix should shift.
Summary
If you receive income from dividends, savings or property, rate increases enacted in Finance Act 2026 will raise your tax liabilities. But by understanding timing, allowances and structuring, you can manage exposures and reduce surprises.