United Kingdom: Budget 2026 raises tax on savings and rental income from 6 April 2027

The United Kingdom Budget delivered on 28 October 2026 by Chancellor John Healey raises tax on savings and property income from 6 April 2027, halves the lifetime limit for Business Asset Disposal Relief, and raises the trading allowance for small traders, while headline rates of income tax, National Insurance and VAT stay unchanged.

What changes

From 6 April 2027, income tax on savings will be 24% at the basic rate, 44% at the higher rate and 49% at the additional rate, with the same rates for property income in England, Wales and Northern Ireland, according to the Budget 2026 Overview of Tax Legislation and Rates. This Budget adds a further 2 percentage points on top of a 2 point rise already legislated in Budget 2025, so against today's 20%, 40% and 45% the total rise from April 2027 is 4 points. The Personal Savings Allowance and the starting rate for savings do not change, and the cash ISA limit stays at 20,000 pounds after a planned cut to 12,000 pounds was dropped.

For business sellers, the lifetime limit for Business Asset Disposal Relief falls from 1 million pounds to 500,000 pounds for disposals on or after 6 April 2027, with the 18% rate unchanged. Alongside that cut, a new Founders' Relief will apply a 10% capital gains tax rate on up to 10 million pounds in lifetime gains for qualifying founders of high-growth, innovative companies from 6 April 2027, subject to eligibility rules.

For self-employed people and small traders, the trading allowance rises from 1,000 pounds to 3,000 pounds from 6 April 2027. Most unused pension funds and death benefits will count towards a person's estate for inheritance tax from the same date, while a new Pension Tax Allowance will remove income tax for pensioners whose total income does not exceed the full new State Pension, with a taper above it.

Who it affects

The savings and property rise falls on people with rental income and people with savings held outside ISAs. Savings held in a cash ISA up to the 20,000 pound limit sit outside it, and the Treasury estimate reported is that most income tax payers are unaffected, because the rise is concentrated on rental and non-ISA savings income. Landlords with UK rental income, including non-residents with UK rental income, are in scope for the property rates.

The relief cut matters to business owners planning a sale on or after 6 April 2027, and the trading allowance rise matters to sole traders and small side businesses with trading income up to the new limit. On pay, the National Living Wage rises 3.9% to 13.21 pounds an hour from 1 April 2027 for workers aged 21 and over, with 11.27 pounds for 18 to 20 year olds and 8.31 pounds for under 18s and eligible apprentices.

Other measures and later dates

A Household Energy Payment of 100 pounds will be paid from January 2027 to households in England in council tax bands A to D, the VAT cut on domestic electricity is extended to 1 July 2027, and the 5p fuel duty cut and freeze are extended to the same date. The gas standing charge is to be scrapped in 2027, or as soon as possible after, with costs moved to the unit rate, so households that use more gas may not save.

The tax-free mileage rate for the first 10,000 business miles is made permanent at 55p, with the rate above 10,000 miles rising to 35p from 6 April 2027, as set out in the Budget 2026 Red Book. A High Value Council Tax Surcharge on homes in England worth 2 million pounds or more will apply from April 2028, and mandatory VAT e-invoicing between VAT-registered businesses will apply from April 2029.

What it means in general terms

The Budget leaves the main tax rates alone and raises revenue from savings, rental income and business exits instead. For a saver or landlord, the practical question from April 2027 is where income is held, since ISA savings up to the limit and the unchanged savings allowances sit outside the rise. For a business owner with a sale in prospect, the date of disposal matters, since the lower relief limit applies from 6 April 2027. The savings and property rates still need legislation in Finance Bill 2026-27, so details should be checked as the Bill progresses.