Income Tax Rate Changes: Property, Savings and Dividends in 2026/27

Income tax rate changes announced by the government affect people receiving income from property, savings and investments, but the changes do not all take effect at the same time.

For the 2026/27 tax year, landlords and savers should be particularly careful not to apply rates that do not begin until April 2027. Property and savings income broadly remain subject to the existing Income Tax rates during 2026/27, while the ordinary and upper dividend tax rates increased from 6 April 2026.

This guide explains what has changed for 2026/27, what remains unchanged, and the further Income Tax changes already announced for property and savings income from 6 April 2027. These rates sit within the wider Income Tax framework explained in our ultimate guide to personal tax in the UK.

What Income Tax Rate Changes Apply in 2026/27?

The main immediate change for investment income in 2026/27 relates to dividends.

From 6 April 2026, the dividend tax rates are:

The ordinary dividend rate increased from 8.75% to 10.75%, while the upper rate increased from 33.75% to 35.75%. The additional dividend rate remains 39.35%. The Dividend Allowance remains £500 for 2026/27.

Is There a Property Income Tax Change in 2026/27?

There is no new separate Property Income Tax change taking effect during the 2026/27 tax year.

For taxpayers in England, Wales and Northern Ireland, property income continues to be included within the normal Income Tax calculation. The standard rates remain broadly:

• 20% basic rate.
• 40% higher rate.
• 45% additional rate.

The standard Personal Allowance also remains £12,570 for 2026/27, although it is reduced where adjusted net income exceeds £100,000 and is normally lost completely at £125,140.

Scottish taxpayers are subject to separate Scottish Income Tax rates and bands for non-savings, non-dividend income, so landlords resident in Scotland should use the rates applying to their own circumstances. These property rates also don’t apply in the same way to income covered by the Rent a Room Scheme, which has its own separate exemption limit.

Reviewing Rent-a-Room relief separately is worthwhile for anyone letting a furnished room in their own home, since this income sits outside the normal property rate structure altogether.

When Will the New Property Income Tax Rates Apply?

A significant new income tax rate regime for property income is scheduled to begin from 6 April 2027, not 6 April 2026.

From the 2027/28 tax year, the government has announced separate rates specifically for property income:

This represents a two-percentage-point increase compared with the existing 20%, 40% and 45% rates that broadly apply to property income for taxpayers in England, Wales and Northern Ireland during 2026/27.

Landlords should therefore distinguish between the tax bill arising for 2026/27 and the higher property rates scheduled to apply from April 2027.

How Rental Property Income Is Taxed in 2026/27

Landlords generally pay Income Tax on their taxable property profit rather than simply on gross rental receipts. Understanding how to calculate tax on rental income can help landlords establish the taxable profit to which the relevant Income Tax rates apply.

Taxable profit is broadly calculated after deducting qualifying expenses under the normal property income rules. Depending on the property business, allowable costs can include:

• Repairs and routine maintenance.
• Letting agent and management fees.
• Buildings and contents insurance.
• Accountancy and professional fees relating to the property business.
• Utilities and other costs paid by the landlord where allowable.

Capital improvements are generally not deducted as ordinary property expenses. Residential finance costs are also subject to separate rules for individual landlords, with qualifying interest generally relieved through a basic-rate tax reduction rather than being fully deducted from rental profits. Landlords with smaller rental income should also check whether the tax-free allowance on trading and property income might offer a simpler alternative to itemising expenses.

Property Income and Making Tax Digital in 2026/27

Another important change for landlords in 2026/27 is Making Tax Digital for Income Tax.

From 6 April 2026, qualifying sole traders and landlords with combined gross qualifying income above £50,000 are required to use Making Tax Digital for Income Tax, subject to exemptions and the detailed eligibility rules.

The threshold falls to more than £30,000 from 6 April 2027 and more than £20,000 from 6 April 2028.

This is separate from the income tax rate changes. MTD changes how affected taxpayers keep records and report information to HMRC; it does not itself change the Income Tax rate charged on rental profit.

Savings Income Tax in 2026/27

Savings income includes interest from sources such as bank and building society accounts that is not otherwise sheltered from tax.

For 2026/27, the savings basic, higher and additional rates remain:

• 20% basic rate.
• 40% higher rate.
• 45% additional rate.

The announced two-percentage-point increase in savings Income Tax rates does not take effect until 6 April 2027.

Personal Savings Allowance for 2026/27

The Personal Savings Allowance can allow some interest to be received without an Income Tax charge.

For 2026/27:

The amount of interest covered by the allowance depends on the taxpayer’s overall Income Tax position. Interest above the available allowance is taxable at the appropriate savings rate.

What Happens to Savings Tax From April 2027?

From 6 April 2027, the government has announced higher tax rates specifically for savings income.

The Personal Savings Allowance remains an important consideration because the new rates apply to taxable savings income after relevant allowances and reliefs have been taken into account.

Do ISAs Remain Tax-Free?

Interest and investment income arising within a qualifying Individual Savings Account (ISA) remains sheltered from UK Income Tax under the normal ISA rules.

This means interest earned inside an ISA is not simply added to taxable savings income and subjected to the new savings rates.

For individuals holding significant cash savings outside tax-efficient accounts, reviewing how much interest is likely to exceed the Personal Savings Allowance can become increasingly relevant as interest rates and account balances change.

Dividend Income Tax Changes for 2026/27

Unlike property and savings income, dividend rates did change from 6 April 2026.

For 2026/27, dividends above the available £500 Dividend Allowance are taxed according to the individual’s applicable dividend tax band.

The rates are 10.75% at the ordinary rate, 35.75% at the upper rate and 39.35% at the additional rate.

This affects investors with taxable share portfolios as well as owner-managed company directors who receive dividends from their businesses.

Company owners should therefore avoid using 2025/26 dividend rates when estimating the personal tax cost of dividends paid during 2026/27.

How the Income Tax Changes Affect Landlords and Investors

The staggered introduction of the changes means different types of investment income need to be considered separately. For jointly owned rental property, this also means reviewing the underlying beneficial interests in jointly held property, since this can differ from legal ownership.

During 2026/27:

• Dividend ordinary and upper rates have increased.
• Property income has not yet moved to the new 22%, 42% and 47% rates.
• Savings income has not yet moved to the new 22%, 42% and 47% rates.
• The Personal Savings Allowance remains available according to the taxpayer’s tax band.
• The Dividend Allowance remains £500.

From 6 April 2027, property and savings income will then become subject to their new separate rates. Getting the approach to sharing income from jointly held property right is particularly important where each owner’s tax position differs.

Planning for the New Property and Savings Rates

Taxpayers affected by the upcoming changes should review their position before the 2027/28 tax year rather than waiting until the higher rates appear on a tax return.

For landlords, this can include reviewing expected rental profits, allowable expenses, finance costs and the timing of significant property expenditure.

Savers may want to review how much taxable interest they expect to receive outside ISAs and whether their Personal Savings Allowance is likely to cover it.

Investors and company shareholders should separately consider the dividend rate increases that already apply during 2026/27.

Tax planning should reflect genuine financial and investment objectives rather than moving assets or income solely to obtain a tax advantage.

Reporting Property and Savings Income to HMRC

Taxpayers remain responsible for ensuring taxable income is reported correctly, even where some information is supplied directly to HMRC by banks, investment providers or other organisations.

Property income may need to be included on a Self Assessment return where the relevant reporting conditions are met. This includes situations involving letting part of your home, which can be taxed differently depending on whether the accommodation forms part of your main residence.

For savings interest, HMRC may sometimes adjust a PAYE tax code using information received from financial institutions. However, taxpayers should still check that HMRC has complete and accurate information, particularly where they have several accounts or other sources of taxable income.

Common Mistakes With the Income Tax Rate Changes

• Applying the 22%, 42% and 47% property rates to the 2026/27 tax year instead of 2027/28.
• Applying the new savings rates one year too early.
• Continuing to use the old 8.75% and 33.75% dividend rates after 5 April 2026.
• Assuming all savings interest is tax-free because a Personal Savings Allowance exists.
• Forgetting that additional-rate taxpayers receive no Personal Savings Allowance.
• Confusing the Dividend Allowance with a separate tax-free tax band.
• Failing to distinguish gross rental income from taxable rental profit.
• Ignoring Making Tax Digital requirements because the underlying property tax rates have not yet changed.

Preparing for Income Tax Rate Changes

The income tax rate changes affecting property, savings and dividends are being introduced over more than one tax year.

For 2026/27, landlords and savers broadly remain under the existing property and savings Income Tax rates, while dividend taxpayers face increased ordinary and upper dividend rates from 6 April 2026.

The more substantial Property Income Tax change and savings tax increase starts from 6 April 2027, when separate basic, higher and additional rates of 22%, 42% and 47% are due to apply.

Keeping the effective dates separate is important for accurate tax forecasting. Landlords, savers and investors should review which type of income they receive, which allowances apply and when each new income tax rate actually comes into force.

Disclaimer: This article provides general information about UK Income Tax changes based on legislation and government announcements available for 2026/27. Individual circumstances, Scottish Income Tax, investment structures and subsequent legislative changes can affect the tax treatment.

Case Study: Planning for Different Property, Savings and Dividend Tax Rates

Martin approached our Farringdon office because he received income from several sources and was unsure which Income Tax rate changes applied during 2026/27. Alongside employment income, he owned a rental property, held substantial cash savings and received dividends from an investment portfolio.

Cigma Accounting reviewed each income source separately. We explained that Martin’s taxable property profit and savings income remained subject to the existing applicable Income Tax rates during 2026/27, while the ordinary and upper dividend rates had already increased from 6 April 2026. This prevented him from mistakenly applying the announced 22%, 42% and 47% property and savings rates one year too early.

We then looked ahead to 6 April 2027, when the new separate property and savings rates are due to take effect. For Martin’s rental property, we reviewed expected taxable profit, allowable expenses and residential finance costs. For his savings, we considered the interest expected to fall outside his Personal Savings Allowance and how his ISA holdings fitted into his wider position.

As part of the wider review, Cigma Accounting also considered Martin’s Self Assessment, property tax, investment income and personal tax planning. This gave him a clearer forecast of his likely liabilities across both tax years rather than treating every type of investment income as though the same rate changes applied at the same time.

Martin was left with a clearer understanding of what had already changed in 2026/27, what would change from April 2027 and how the different rates could affect his future rental, savings and investment income.