Tax on property income Property income is any income from letting land and buildings. Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses. The government is introducing the following separate tax rates for property income from 2027/28: • 22% for basic rate taxpayers • 42% for higher rate taxpayers • 47% for additional rate taxpayers. Tax on savings income Savings income is income such as bank and building society interest. The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. This will remain at £5,000 until 5 April 2031. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000. The current tax rates on savings income will be maintained for 2026/27. From 6 April 2027, there will be a 2% increase in the applicable tax rates. The basic rate will increase to 22%, the higher rate will increase to 42% and the additional rate will increase to 47%. Tax on dividends Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2026/27.
These rules apply to the whole of the UK.
From 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35% Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:
• 10.75% for basic rate taxpayers • 35.75% for higher rate taxpayers • 39.35% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance. To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed. Income Tax ordering rules The Income Tax ordering rules will change from 6 April 2027. The personal allowance will be deducted from employment, trading or pension income first. Currently, individuals can choose which income the allowance is offset against.
Savings income within the allowance still counts towards an individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.
Personal Tax
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