A worked example
The director owns the building the company trades from, outright and in their own name, and lets it to the company for £30,000 a year. The company pays the repairs and insurance under the lease, so the £30,000 is the director's rental profit. The director also takes a £12,570 salary, which the personal allowance covers. The figures about the director are an illustration; the rates come from the Budget documents.
| The director | 2026/27, today | 2027/28, after the Budget | Difference |
|---|---|---|---|
| Rent from the company | £30,000.00 | £30,000.00 | |
| Income tax on the rent at the basic rate (20% today, 24% from 2027/28) | £6,000.00 | £7,200.00 | +£1,200.00 |
| Kept from the rent | £24,000.00 | £22,800.00 | −£1,200.00 |
From 6 April 2027 rent is taxed after salary and before savings and dividends, and the personal allowance goes against the salary first. With a £12,570 salary, all £30,000 of rent falls in the £37,700 basic rate band. Any dividends sit above the rent in the bands, as they do now, and are taxed at the same rates as today.
Rent in the higher rate band is taxed at 44% instead of 40% today, and above £125,140 at 49% instead of 45%. That is 4 percentage points more at every rate, so each £10,000 of taxable rent costs £400 a year more than today.
Savings. Interest on savings held personally is taxed at 24%, 44% and 49% from 6 April 2027, also 4 points above today's 20%, 40% and 45%. The allowances do not change: the Personal Savings Allowance stays at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, and the starting rate for savings stays at 0% on up to £5,000. Each £10,000 of taxable interest above them costs £400 a year more than today.
A home let with a mortgage. On a residential letting, mortgage interest is not deducted from the rent; it gives a tax reduction at the basic rate, 20% today. From 2027/28 the law gives that reduction at the property basic rate instead, 24% after this Budget. On £10,000 of mortgage interest the reduction is £2,000 today and £2,400 in 2027/28.
When it takes effect
From 6 April 2027, the start of the 2027/28 tax year, once Finance Bill 2026-27 is law. The 2026/27 tax year, to 5 April 2027, is taxed at today's rates.
Who it doesn't affect
- Salary and dividends: the Budget left income tax on earnings, National Insurance and dividend tax where they were for 2027/28 (see salary and dividends).
- A company that owns its premises itself: there is no rent to a director, and the Budget did not change corporation tax.
- Savings in an ISA or a pension, and interest within the allowances above.
- Scottish taxpayers' rent: the 24%, 44% and 49% property rates apply in England, Wales and Northern Ireland, and the Scottish Parliament can set its own. The savings rates are the same across the UK.
HM Treasury says 84% of income tax payers are unaffected by the higher savings and property rates.
Where this comes from
- Budget 2026 (HM Treasury), "Making fair choices on revenue raising": rates of tax on earnings unchanged; savings and property income rates up from April 2027; 84% of income tax payers unaffected
- Budget 2026 (HM Treasury), policy decisions 7.20, "Property taxation": property rates of 24%, 44% and 49% across England, Wales and Northern Ireland, and savings rates of 24%, 44% and 49% across the UK, from 6 April 2027, legislated in Finance Bill 2026-27
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 1.1: savings rates of 24%, 44% and 49% for 2027/28
- Budget 2026 OOTLAR, section 1.2: property rates of 24%, 44% and 49% for 2027/28 across England, Wales and Northern Ireland; Scotland and Wales can set their own property income rates
- Budget 2026 OOTLAR, Annex A: savings rates 20%, 40% and 45% for 2026/27 and 24%, 44% and 49% for 2027/28; property rates 24%, 44% and 49% for 2027/28 (property income taxed at the main rates in 2026/27); the 0% starting rate for savings on up to £5,000; the Personal Savings Allowance of £1,000 and £500; the basic rate band of £37,700
- Change to tax rates for property, savings and dividend income: technical note (HMRC, Budget 2025): from 2027/28 property income is taxed after other income and before savings and dividends; the personal allowance goes against other income first
- Income Tax (Trading and Other Income) Act 2005, section 274AA: the tax reduction for residential finance costs, at the basic rate to 2026/27 and at the property basic rate from 2027/28 (Finance Act 2026, Schedule 1, paragraph 40)
- Changes to tax relief for residential landlords (HMRC): the finance cost reduction is the basic rate value, currently 20%
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Alan Davidson FCA. Last updated . It is general information, not advice on your own position.