- November 26, 2025
- Written by Mark Tibbert
- Category: Blog
Income tax Rate changes – Budget 2025
Following the Chancellor’s Budget statement today – although said quietly in the speech, after announcing she would not be increasing income tax or National Insurance – Rachel Reeves did confirm there will be an increase to the income tax rates for specific types of non-earned income.
Alongside the increase in rates there was confirmation that the personal allowance will be frozen at current levels for longer, with a freeze now being in place until 2031.
The changes will be phased in from April 2026 and the table below highlights the proposed changes
| 2025/26 Rates | 2026/27 Rates | 2027/28 Rates | |
| Dividend income | 8.75% / 33.75% / 39.35% | 10.75% / 35.75% / 39.35% | 10.75% / 35.75% / 39.35% |
| Savings income (interest) | 20% / 40% / 45% | 20% / 40% / 45% | 22% / 42% / 47% |
| Property income | 20% / 40% / 45% | 20% / 40% / 45% | 22% / 42% / 47% |
While there is another year to plan for the impact of the property and savings tax increases, for landlords in particular the increase in tax combined with other changes over recent years is another hit to the income of private landlords. This comes as many are already carefully considering their position given the changes in regulation and additional compliance requirements. The next year will be interesting to see how the sector develops and whether it forces landlords to consider their position and the potential impact that would have on rental levels or if they look at different operating structures.
For owner managed businesses the change in dividend taxation from April means careful consideration will need to be given to remuneration structures. Historically it has always been marginally better to look at a mix of salary and dividends, with a 2% increase on dividend rates from April for a business with £100,000 of profit then continuing with a dividend strategy would cost around £1,300 in additional tax.
While the changes have not been as bad as speculation that National Insurance would be added to property income, the increase is still an increase. If you would like to discuss how the changes impact you, please contact Mark Tibbert or your usual Westcotts contact.
