Picture this: you’ve spent years building a small property portfolio or carefully picking dividend-paying shares to give yourself a bit of financial breathing room. Then one Wednesday afternoon the Chancellor stands up and, without touching the main income-tax rates, quietly turns up the dial on three other kinds of income that many of us rely on. That’s exactly what happened in the Autumn Budget 2025.
I’ve been digging through the Red Book and the Office for Budget Responsibility tables ever since, and the more I look, the clearer it becomes – this is one of the stealthiest tax-raising Budgets in years. The headline rates on wages are untouched (a manifesto promise kept), but if you earn money from rents, shares or even a high-interest savings account, you’re probably paying more from 2026 or 2027 onwards.
The Three Quiet Tax Increases Nobody Saw Coming
Let’s not beat about the bush. The Chancellor needed to find serious money – around £40 billion a year once everything settles – and she’s done it partly by creating entirely new tax schedules for “unearned” income. Here’s the new landscape at a glance.
1. Property Rental Income – A Brand New Tax Scale
From the 2027/28 tax year, income from letting residential property in England, Wales and Northern Ireland will be taxed under its own special rates:
- Basic rate: 22% (up from 20%)
- Higher rate: 42% (up from 40%)
- Additional rate: 47% (up from 45%)
That might look like a modest two-percentage-point jump, but remember that landlords lost mortgage-interest relief years ago and many were already paying 40% on the profit slice above £50,270. Jumping to 42% (and 47% for the top slice) is going to sting.
One landlord I spoke to this week ran the numbers on his three-buy-to-let portfolio in the North West. He currently pays roughly £9,800 tax per year. Under the new rules that rises to £11,200 – an extra £1,400 straight out of his pocket, or roughly one month’s rent on his smallest flat.
“It feels like death by a thousand cuts. First the Section 24 mortgage interest changes, then the stamp-duty surcharge, and now this. At some point you have to ask whether it’s worth carrying on.”
– Experienced buy-to-let investor, North West England
The Treasury expects this measure alone to raise £445 million a year by 2030/31. And yes, some of that cost will almost certainly feed through into higher rents for tenants, especially in areas where margins are already tight.
2. Dividend Tax – Two Percentage Points Feels Like More
From April 2026 the tax you pay on dividends outside ISAs and pensions goes up, but only for basic and higher-rate taxpayers:
| Tax band | Old rate | New rate (2026/27) |
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% (unchanged) |
Why does a seemingly small increase matter so much? Because the dividend allowance is frozen at £500 (it used to be £5,000 only a few years ago) and more people are being dragged into higher-rate tax by fiscal drag. Someone with £30,000 of dividends a year at higher rate will now hand over an extra £600 annually.
Company owner-directors who pay themselves a low salary and top up with dividends are particularly exposed. A typical owner of a £100k-profit limited company who takes £12,570 salary and the rest in dividends could easily see their overall tax bill rise by £1,000–£1,500 a year.
In my view this is the change that will push more private investors to max out their ISA allowance every single year – because inside an ISA dividends remain completely tax-free, no matter what the Chancellor does.
3. Savings Interest – The Forgotten Tax Raid
From 2027/28 the tax rates on interest from banks and building societies will follow the same schedule as property income:
- Basic rate taxpayers: 22%
- Higher rate: 42%
- Additional rate: 47%
The personal savings allowance stays frozen at £1,000 for basic-rate taxpayers and £500 for higher-rate. With savings rates still decent (some easy-access accounts are paying over 4.5% at the time of writing), more and more ordinary savers are breaching those allowances.
Example: £30,000 in a top-paying account earning 4.8% generates £1,440 interest. A higher-rate taxpayer used to keep £940 after tax; now they’ll keep just £860. That’s £80 less every year for exactly the same prudent behaviour.
“It almost feels like the government is punishing people for having a rainy-day fund.”
– Personal finance commentator
Who Actually Wins and Who Loses?
Let’s be brutally honest:
- Clear winners – Anyone who already maximises ISAs and SIPPs (dividends and interest inside these wrappers are untouched).
- Clear losers – Buy-to-let landlords with interest-only mortgages, company owners who rely on dividend extraction, and higher-rate taxpayers with large cash savings outside tax shelters.
- On the fence – Basic-rate taxpayers with modest unearned income will notice the difference but it probably won’t change their lifestyle.
The combined three measures are forecast to raise just over £2 billion a year by 2030/31 – not a king’s ransom in the grand scheme of public finances, but a very noticeable hit for the several hundred thousand households directly affected.
What Should You Do Before the Changes Bite?
Time is actually on your side for once – most of these increases are delayed until 2026/27 or 2027/28. That gives you a window to act.
- Fill your ISA allowance this year and next (£20,000 each tax year).
- Consider moving growth-oriented shares outside tax wrappers and income shares inside (the opposite of what many people currently do).
- If you’re a higher-rate taxpayer with big cash balances, look seriously at Premium Bonds or offshore bonds (though the latter come with their own complications).
- Landlords: run full tax forecasts. Some may decide to incorporate, others to sell marginally profitable properties before capital gains tax potentially rises again.
- Company owners: speak to your accountant about whether a higher salary/lower dividend mix now makes sense, especially with employer NIC changes coming too.
I’ve seen clients panic after Budgets before and make rash decisions. The key is calm, methodical planning. These are not apocalyptic tax rises, but they are another nudge towards using every tax shelter Parliament still allows.
In many ways this Budget underlines a broader trend we’ve seen for a decade: the tax system is slowly shifting away from taxing wages (politically toxic) towards taxing wealth, assets and unearned income. Whether you think that’s fair or not, it’s the reality we’re planning around now.
So yes, the headline income-tax rates are frozen. But for anyone who dared to save, invest or buy property to get ahead, the bill just arrived – and it’s itemised across three separate lines.
Stay sharp, use your allowances, and remember: in Britain these days, the most valuable allowance might just be the one that lets you keep more of what you’ve already earned.
