Autumn Budget brings higher tax on savings, dividends and property income

The Chancellor’s latest Budget has introduced increases to income tax rates on savings, dividends and property income. These measures, which will be phased in over the next two years, are set to impact millions of savers, investors and landlords across the UK. The change is one of the most impactful for people looking to grow their wealth, particularly when combined with the measures also announced to limit the ability to save into retirement pensions.

The headline is a 2% increase to income tax on dividends, savings interest and property income, but the way this will be phased in and the new rates that will apply will differ across the three sources.

Dividend income

From 6 April 2026, basic rate income tax on dividends will increase to 10.75% and the higher rate will rise to 35.75%. The additional rate remains unchanged at 39.35%.

Property income

From 6 April 2027, income tax on property rental income will increase to 22% at the basic rate, 42% at the higher rate and 47% at the additional rate.

Savings income

From 6 April 2027, the basic rate on savings interest will increase to 22%, the higher rate to 42%, and the additional rate to 47%.

These measures represent a broad-based tax hike on non-employment income. While many expected dividend taxes to be the main target, the inclusion of savings and property income came as a surprise. Together with the freeze on personal savings allowances and upcoming ISA reforms, these changes could significantly reduce net returns for savers, especially as interest rates on cash deposits continue to fall.

For wage earners, the freeze on income tax thresholds until 2030/31 adds further pressure. According to the Office for Budget Responsibility, the overall tax burden is projected to reach 38% by 2030, an unprecedented level for the UK.

The dividend tax hike will be particularly challenging for those who take income from their own companies. Business owners already pay corporation tax on company profits, and now, extracting those profits as dividends will attract higher personal tax rates.

The increased income tax rates on dividends means that after paying Corporation Tax at up to 25%, the effective tax burden on distributed profits will increase significantly. This could reduce the net income available to entrepreneurs and may prompt the need for a rethink of remuneration strategies, such as balancing salary and dividends or exploring tax-efficient investment options.

Private landlords face yet another challenge. After years of reforms making buy-to-let less attractive, these new property tax rates could be the tipping point for many. The past decade has seen a steady erosion of landlord profitability through measures such as:

• Section 24 mortgage interest relief restrictions – phased out between 2017 and 2020, meaning landlords can no longer deduct mortgage interest from rental income and instead receive only a basic-rate tax credit
• Stamp Duty surcharge on second homes – introduced in 2016, adding a 3% premium on additional property purchases
• Reduced capital gains tax (CGT) allowances – cutting the annual exemption and tightening rules on disposals

The Renters’ Rights Act, which begins implementation in May 2026, adds a new layer of complexity. It abolishes Section 21 ‘no-fault’ evictions, replaces fixed-term tenancies with open-ended agreements and limits rent increases to once a year with two months’ notice. The Act also bans rental bidding wars and discrimination against tenants on benefits or with children, requires landlords to consider pet requests reasonably and imposes stricter repair standards under Awaab’s Law.

Taken together, these reforms significantly increase costs and reduce flexibility for landlords. With rental properties already in short supply, further discouraging investment could exacerbate the housing crisis. Unless alternative housing solutions emerge, tenants may face rising rents and fewer choices in the years ahead.

With these changes on the horizon, it’s more important than ever to review your financial plans. Whether you’re a saver, investor or landlord, understanding how these tax increases will affect your income streams is crucial.

At Evelyn Partners, we’ll be working with our financial planning, investment management and Total Wealth Management clients to understand the impact on their financial situation and consider strategies to help keep their plans on track. If you’d like to discuss the Autumn Budget changes or your wider finances, book an appointment.