In the Autumn Budget 2025, the Chancellor confirmed a clear shift in where the tax burden will fall. Instead of raising the main income tax rates, the Government will increase tax on savings, dividends and property income over the next few years.
For many investors, company directors, landlords and savers across Scotland and the rest of the UK, these changes will matter just as much as the freeze in income tax thresholds.
Current savings allowances and bands
The starting point is the existing framework for savings income in 2026/27.
- The starting rate band for savings remains at £5,000. Savings interest within this band can still be taxed at 0%, provided your taxable non-savings income (for example, salary or pension income) does not exceed the band.
- Most savers can also benefit from a Personal Savings Allowance (PSA) at 0%:
- £1,000 for basic rate taxpayers
- £500 for higher rate taxpayers
- £0 for additional rate taxpayers
These allowances mean that many people with modest levels of savings interest pay little or no tax on savings at present. However, this position will change as interest rates rise and as the tax rates on savings increase.
Tax on savings: rates rising from April 2027
From April 2027, the tax rate on savings income will increase by two percentage points across all tax bands.
The rates will be:
- Basic rate on savings income: rising from 20% to 22%
- Higher rate: rising from 40% to 42%
- Additional rate: rising from 45% to 47%
The starting rate band and PSA will still apply. Once those allowances are used, more of your interest will be taxed and at higher rates.
Dividend tax: higher rates but the same allowance
Dividend income is also being targeted.
For 2026/27, the dividend allowance – the slice of dividend income taxed at 0% – remains at £500 for all individuals.
From April 2026, the ordinary and upper dividend rates will both increase by two percentage points:
- Ordinary rate (basic rate taxpayers): rising from 8.75% to 10.75%
- Upper rate (higher rate taxpayers): rising from 33.75% to 35.75%
- Additional rate: remaining at 39.35%
So the allowance is frozen, but the tax charged once you exceed that allowance will be higher.
For trusts, the dividend rate applicable to trusts stays at 39.35%. The general income exemption for trusts also remains at £500.
Property income: a new rate structure from 2027
Rental and other property income will see a new rate structure.
From April 2027, separate property income tax rates will apply.
The new rates are:
- Property basic rate: 22%
- Property higher rate: 42%
- Property additional rate: 47%
These property rates will apply in England, Wales and Northern Ireland. The UK Government will work with the devolved governments of Scotland and Wales so that they can set property income rates in line with their own income tax powers.
Alongside the main rates, the following allowances are unchanged:
- Rent-a-room relief stays at £7,500.
- The property allowance remains at £1,000.
- The separate trading allowance is also £1,000.
These allowances still shelter smaller amounts of rental or casual income. Any income above them will fall into the higher property rate structure once the changes take effect.
How reliefs and allowances will be applied
The Budget also changes the order in which reliefs and allowances are set against income. This change starts on 6 April 2027.
From that date:
Reliefs and allowances that are deductible in income tax calculations will only be applied to property, savings and dividend income after they have been applied to other sources of income.
In practice, deductions such as pension contributions or certain tax reliefs will first reduce non-savings, non-dividend income. That includes salary, trading profits or pension income. Only any remaining relief will then be available to set against property income, savings income or dividend income.
This new ordering reduces the scope to use reliefs mainly to shelter investment or rental income from tax.
A reminder about the personal allowance
The personal allowance still plays an important role.
For 2026/27, it remains at £12,570. It is reduced by £1 for every £2 of adjusted net income over £100,000 and is fully withdrawn once income exceeds £125,140.
The summary includes this planning reminder:
Don’t lose your personal allowance.
If your income falls between £100,000 and £125,140, you may be able to make a pension contribution or a charitable gift. This can reduce your adjusted net income below £100,000 and preserve your personal allowance.
This type of planning can be especially valuable if you also receive significant savings, dividend or property income.
What do these changes mean for you?
Taken together, these measures mean that:
- More interest, dividends and rental profits will be taxed.
- The rates on that income will rise in the second half of the decade.
- Reliefs and allowances will become harder to focus solely on investment or property income.
If you rely on dividends from your company, have substantial savings, or own rental property, it is worth reviewing how and when you take income. The structure of your investments, your use of ISAs and pensions, and the way you hold property can all influence your final tax bill.
For a detailed breakdown of the Budget’s key components, you can view the full document here.