Higher Tax on Savings and Property Income: 6 key things individuals should be considering now

The Autumn Budget 2026 included a further increase in the rates of tax applying to savings and property income, continuing the government’s policy of narrowing the gap between the taxation of earned income and income generated from assets.

From April 2027, savers and landlords could face significantly higher tax bills unless they take proactive steps to review their affairs.

Alongside these changes, the Chancellor also confirmed amendments to capital allowance rates, which will further impact landlords holding commercial property.

Higher tax on savings and property income

The key announcement was a further two percentage point increase in the rates applying to both savings income and property income from 6 April 2027.

The new rates will be:

Income type	Basic rate	Higher rate	Additional rate
Savings income	24%	44%	49%
Property income	24%	44%	49%

 

These rates replace the 22%, 42% and 47% rates that had already been announced in the previous Budget.

We will discuss below how these rates apply across the UK.

Savings income

Savings income commonly includes taxable bank and building society interest, but also covers various other investment returns.

The increased rates will apply across the whole of the UK.

Importantly, the Personal Savings Allowance remains available:

• Basic rate taxpayers can generally receive up to £1,000 of savings interest tax-free.
• Higher rate taxpayers can generally receive up to £500 tax-free.
• Additional rate taxpayers do not currently benefit from a Personal Savings Allowance.

A further starter rate for savings is available in certain circumstances.

While these allowances remain valuable, rising interest rates in recent years have caused many individuals to exceed them for the first time, meaning more savers will now feel the impact of the higher rates from April 2027.

Property income

The budget changes also increase the tax burden on rental profits.

For taxpayers in England and Northern Ireland, rental profits will be taxed at 24%, 44% and 49% depending on the taxpayer’s marginal rate band.

The devolved governments in Scotland and Wales can set their own property income tax rate. Any changes will be announced in the budgets on 17 November and 3 December respectively.

A particularly important point for residential landlords is that mortgage interest relief remains restricted. Relief is provided at the basic property rate rather than at an individual’s marginal rate, meaning highly geared landlords may continue to suffer relatively high effective tax rates.

Capital allowances: what changes are coming?

Those landlords with commercial properties should also note the changes to capital allowances. For clarity, residential landlords are not permitted to claim capital allowances.

What allowances are changing?

First Year Allowances provide enhanced tax relief by allowing qualifying expenditure to be deducted in full in the year the cost is incurred. 40% of the qualifying expenditure will be relieved in the year of purchase.

Writing Down Allowances , where available, write down the balance annually on a reducing balance method, as opposed to providing an immediate deduction. The current rate is 14%.

What is changing?

The rates will be changing to the following:

• First Year Allowances – 50% (from 1 January 2027)
• Writing Down Allowances – 12% (from 6 April 2027 for personal tax)

This will allow commercial landlords to benefit from more tax relief on their expenditure in the year of purchase.

6 key things individuals should be considering now

With the increased tax rates not taking effect until April 2027, taxpayers have a window in which to review their position.

1. For savers

Individuals should consider whether assets are being held in the most tax-efficient manner.

Potential planning opportunities include:

• Maximising annual ISA subscriptions.
• Reviewing ownership of savings between spouses and civil partners.
• Considering investment products that allow returns to roll up rather than be taxed annually.

The right approach will depend on wider financial objectives, liquidity requirements and future expected tax rates.

2. For landlords

Landlords may wish to revisit the long-term viability of their structures.

Options worth exploring include:

3. Incorporation

For some property investors, transferring a portfolio into a limited company may reduce future tax liabilities.

However, incorporation is not straightforward. Capital gains tax, stamp taxes, borrowing arrangements and commercial considerations all require careful review before action is taken.

4. Portfolio rationalisation

Some landlords may decide to dispose of underperforming properties where post-tax returns have become unattractive.

The increased tax burden may accelerate existing plans to rebalance portfolios or reduce borrowing, but it is essential to understand exposure to capital gains tax prior to disposing of any properties.

5. Diversification

Investors may increasingly look beyond residential property towards other more tax-efficient investments.

The appropriate strategy will depend on risk tolerance, income requirements and investment objectives.

6. Timing of expenditure

Any landlords considering significant expenditure on a commercial property should first seek advice on qualifying expenditure and, secondly, consider delaying any expenditure until after 31 December 2026.

Looking ahead

The combined effect of higher taxes on savings and property income represents another significant shift in the taxation of investment returns. While the changes do not take effect until April 2027, affected individuals should begin reviewing their affairs now.

For savers, the focus may be on maximising tax-free wrappers and considering income deferral strategies. For landlords, a more fundamental review of ownership structures, borrowing arrangements and portfolio composition may be appropriate.

Landlords investing in commercial property should also ensure that capital allowances opportunities are not overlooked, particularly in relation to qualifying fixtures and equipment where First Year Allowances and Writing Down Allowances can provide valuable tax relief.

As always, the most effective response will depend on individual circumstances, and taxpayers should seek advice before implementing any significant restructuring or investment decisions.

If you have any queries about the changes coming to higher tax on savings and property income please do not hesitate to get in contact with Jill Walker,  or your usual AAB contact.