The chancellor, Rachel Reeves, announced as part of the Autumn Budget measures that the Income Tax thresholds will be maintained at their current levels for a further three years until April 2031. This will see the personal tax allowance frozen at £12,570 through to April 2031 across the UK. In addition, the higher rate threshold will remain at £50,270 (there are differences in Scotland). National Insurance thresholds will also remain frozen until 2031.

This means more taxpayers will be pushed into higher tax bands as income rises faster than the frozen tax bands allow. This phenomenon is known as fiscal drag. The freezing of most of the Income Tax allowance and rates at current levels until 2031 means that many taxpayers will pay more Income Tax as their income increases, with no corresponding increases in their allowances, and more taxpayers will see their taxable income boosted into the 40%, or 45%, Income Tax bands.

The existing thresholds for the basic rate, higher rates, and additional rates of tax have also been frozen for income derived from employment or self-employment. However, the government will create separate tax rates for property, savings & dividend income.

  • Tax on most dividend income will increase by 2% from April 2026. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35%.

The changes to the tax rates for property and savings income will take effect from April 2027.

  • From 2027-28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland.
  • From 2027-28, the savings basic rate will increase to 22%, the savings higher rate to 42%, and the savings additional rate to 47%.

The current rules that allow Basic Rate taxpayers to receive £1,000 of interest without paying tax, and Higher Rate taxpayers to receive £500 without paying tax, are set to remain as is, with the Starting Rate for Savings of up to £5,000 for lower earners. However, you could earn up to £18,570 in tax-free savings interest in 2025–26, thanks to the personal allowance, starting rate for savings, and the Personal Savings Allowance.

 
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Aitch
I'm Aitch, the Founder and CEO of CIGMA Accounting Ltd. As a Chartered Management Accountant and as a CIMA member, I've spent more than 16 years helping businesses, entrepreneurs, landlords, and individuals with tax planning, accounting, and HMRC compliance. As a chartered accountant in London, I'm passionate about making complex tax matters easier to understand and helping clients make confident financial decisions. Over the years, I've advised start-ups, SMEs, established companies, and high-net-worth individuals across a wide range of tax and accounting matters. My expertise includes Corporation Tax, Self-Assessment, Capital Gains Tax, Inheritance Tax planning, R&D tax relief, capital allowances, international tax, and resolving complex HMRC compliance issues. Whether clients need a business accountant, tax accountant, or strategic tax advisor, my focus is always on delivering practical advice that creates long-term value. One of my specialist areas is Making Tax Digital (MTD). I've worked extensively with businesses preparing HMRC's digital reporting requirements, helping them move to cloud accounting, improve financial processes, and adopt technology that makes compliance more efficient. I regularly speak at Making Tax Digital roadshows, industry events, and educational sessions in collaboration with Zoho Books, sharing practical insights into digital accounting, tax legislation, and the future of the profession. Many business owners looking for the best accounting firm in London are not simply searching for an accountant they're looking for trusted advice, responsive support, and long-term value. That's the approach I've taken in building CIGMA Accounting. My team and I work closely with businesses across London and the UK, providing accounting services, tax advisory, bookkeeping, payroll, VAT, company accounts, and strategic tax planning tailored to each client's goals. Through this website, I share practical guidance on UK taxation, Making Tax Digital, HMRC updates, Corporation Tax, Self-Assessment, and business finance. My aim is to provide reliable, straightforward information that helps business owners understand changing regulations, reduce compliance risks, and make informed financial decisions with confidence.
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