The government has announced changes that will affect how income from property, savings, and dividends is taxed. These changes will not affect everyone, but if you are an investor, a landlord, or an owner-manager who takes profits via dividends, it’s crucial to understand how your tax bill may change.
The Main Goal: Fairer Tax on Assets
The central idea behind these changes is to “level the playing field” between tax paid on income from work (salaries and wages) and income from assets (investments). Income from assets is not subject to National Insurance (NICs), so the government is raising the Income Tax rates on these sources to narrow that tax gap.
Here is a simple breakdown of the tax hikes and when they come into effect.
Dividends: The First Change (From April 2026)
This change will affect company owners who pay themselves a combination of salary and dividends, as well as anyone who holds shares outside of tax-efficient accounts like ISAs or pensions.
The Income Tax rates on dividends will rise by 2 percentage points across the Basic and Higher Rate bands:
| Tax Band | Old Rate (2025/26) | New Rate (From 6 April 2026) |
| Basic Rate | 8.75% | 10.75% |
| Higher Rate | 33.75% | 35.75% |
| Additional Rate | 39.35% | 39.35% (Unchanged) |
Good News: The Dividend Allowance (the amount of dividend income you can receive tax-free) will remain at £500.
Savings & Property Income: The Second Change (From April 2027)
If you earn interest on savings (outside of ISAs) or rental income from property, these changes will affect you. The Income Tax rates on both savings interest and property profits will increase by 2 percentage points.
| Tax Band | Old Rate (2025/26) | New Rate (From 6 April 2027) |
| Basic Rate | 20% | 22% |
| Higher Rate | 40% | 42% |
| Additional Rate | 45% | 47% |
🏠 Impact on Landlords
For residential landlords, the tax credit you receive for your finance costs (like mortgage interest) will also increase from 20% to the new 22% Property Basic Rate.
Good News: Key existing reliefs, such as the Personal Savings Allowance (tax-free interest for basic and higher rate taxpayers) and the £1,000 Property Allowance, will remain in place.
💡 Who Will Be Affected?
The government estimates that over 90% of UK taxpayers will not be affected by these changes because their income from savings, property, and dividends is already covered by allowances (like the Personal Savings Allowance, Dividend Allowance, and ISAs).
However, the impact will be significant for the remaining 10%—specifically:
- Company Owner-Managers: Those who rely on dividends for a significant portion of their income.
- Landlords: Especially those with multiple properties and high rental profits.
- High-Net-Worth Individuals: Those with large investment portfolios outside of tax-efficient wrappers.
🖥️ Next Steps for Your Cloud-Based Business
As your cloud-based accountants, our focus is always on future-proofing your finances. Now is the time to start planning:
- Review your Remuneration Strategy: If you’re an owner-manager, we should review your dividend/salary mix before the April 2026 increase.
- Maximise Tax-Free Wrappers: Use your ISAs and Pensions to their full potential, as these investments remain fully sheltered from these new tax hikes.
- Digital Forecasting: We can use our digital tools to forecast your tax liability for both 2026 and 2027, giving you a clear picture of the coming changes and allowing us to plan mitigating strategies well in advance.
Action: Don’t wait until the new rates apply! Contact us today to schedule a digital review and ensure your strategy remains as tax-efficient as possible.
