Income Tax changes from April 2027: what you need to know

Income Tax changes from April 2027: what you need to know

The Autumn Budget 2026 may have left the main Income Tax thresholds unchanged, but there are still some important changes on the horizon, particularly if you receive income from savings or property.

From April 2027, higher tax rates on savings and property income are due to take effect. There will also be a new Pension Tax Allowance designed to protect pensioners on lower incomes.

Here’s what you need to know.

Income Tax thresholds remain frozen

The Personal Allowance will remain at £12,570, while the basic rate limit remains £37,700 and the higher rate threshold £50,270 in England, Wales and Northern Ireland.

These thresholds are set to remain frozen until April 2031.

Although the headline thresholds aren’t changing, a freeze can still result in a higher tax bill over time. As income rises, more people can find themselves paying tax for the first time or moving into a higher tax band. This is sometimes referred to as fiscal drag.

Scottish Income Tax rates and thresholds are different.

Savings income tax rates rise from April 2027

From April 2027, the rates applying to taxable savings income will increase:

• Basic rate: 24%, up from 20%
• Higher rate: 44%, up from 40%
• Additional rate: 49%, up from 45%

These rates are higher than originally planned when changes to the taxation of savings and property income were first announced.

The Personal Savings Allowance remains unchanged. Basic rate taxpayers can receive up to £1,000 of savings income tax-free, while higher rate taxpayers have an allowance of £500.

The 0% starting rate for savings also remains available on up to £5,000 of savings income for eligible people on lower incomes, subject to the relevant conditions.

For people holding significant amounts of cash or interest-bearing investments, the increase makes reviewing how savings are structured increasingly worthwhile.

Property income tax rates are changing too

Landlords will also face higher rates on property income from April 2027 in England, Wales and Northern Ireland:

• Property basic rate: 24%
• Property higher rate: 44%
• Property additional rate: 49%

This could have a meaningful impact on the after-tax return from a rental property, particularly for higher and additional rate taxpayers.

If you have a rental portfolio, this is a good opportunity to review its performance and your wider tax position before the new rates arrive. The right course of action will depend on your personal circumstances, so taking advice before making changes is important.

What about dividend income?

Dividend tax rates are set to remain unchanged for 2027/28.

Income above the £500 Dividend Allowance will continue to be subject to the relevant dividend tax rate:

• Ordinary rate: 10.75%
• Upper rate: 35.75%
• Additional rate: 39.35%

A new Pension Tax Allowance

From 6 April 2027, the Government plans to introduce a new Pension Tax Allowance, initially for three tax years.

Its purpose is to prevent pensioners whose total income is no higher than the full new State Pension from being brought into Income Tax simply because the Personal Allowance is frozen below the level of the State Pension.

The allowance will be calculated at the basic rate of 20% on the difference between the full new State Pension and the Personal Allowance. For pensioners whose income exceeds the full new State Pension, it will reduce by £1 for every £3 of additional income.

It introduces another consideration when planning retirement income, particularly where a household has income coming from several different sources.

Is it time to review your tax planning?

Changes to savings and property taxation, combined with frozen Income Tax thresholds, mean it is worth looking at your finances as a whole rather than considering each source of income in isolation.

Good tax planning isn’t simply about paying less tax. It’s about understanding what you have, what’s changing and making informed decisions early enough to have options.

Our Personal Tax service is designed to support personal tax needs, including more complex circumstances. Charlton Baker also offers Wealth, Wills & Probate support, bringing tax advisers, will writers and probate specialists together. 

Call us now on 01380 723692 or email here.