Budget lifts tax on savings and rents by two percentage points from 2027
The Budget raises income tax on savings interest and rental income by a further two percentage points from April 2027, on top of a two-point rise announced last year. The change increases the tax burden on savers and landlords while leaving tax on employment earnings unchanged.
Basic-rate taxpayers will pay 24 per cent on affected income, higher-rate taxpayers 44 per cent and additional-rate taxpayers 49 per cent. The Government says 16 per cent of income taxpayers will be affected and half the revenue will come from the wealthiest 10 per cent of households; forecasts put the 2031-32 annual revenue at £590 million from savings and £455 million from rents. The Budget also keeps the £20,000 cash ISA allowance, while the OBR warns the rental tax change could reduce landlords’ returns and contribute to rent rises.
In short
- Tax on savings interest and rents rises by two percentage points in April 2027.
- Basic-rate taxpayers will pay 24 per cent on affected income.
- The Government forecasts £1.045 billion in combined annual revenue by 2031-32.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters could argue that raising tax on savings interest and rental income asks people with wealth-derived income to contribute more, while protecting taxes on work. The Government’s figures suggest the burden would fall disproportionately on wealthier households, and the revenue could support public services or fiscal priorities without reducing the cash ISA allowance.
The case against
Critics could argue that taxing savings and rental income more heavily weakens incentives to save and invest in housing, while treating these forms of income less favourably than employment earnings risks unfairness. Landlords may pass some of the added cost on through higher rents or reduce the supply of rental homes, leaving tenants and savers bearing effects beyond the tax bill itself.
Explained simply
Income tax applies to different kinds of personal income, including wages, savings interest and rent received by landlords. The rates depend on a person’s tax band, which is based on their income; employment earnings are taxed separately from savings and rental income.
The Government raises money through tax to fund public services and other spending. Changes to tax on savings and rents can affect people who hold savings or let property, as well as the amount of income the state collects; landlords’ costs and returns can also influence decisions about rents and whether to let property.
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Originally published by Daily Mail as “Savers and landlords hammered with income tax raid in Budget as Healey ratchets up Reeves’ hike by another 2%”.