Budget 2025 announces changes to income tax, duties and allowances

The government will legislate in Finance Bill 2025-26 for the tax measures announced at Budget 2025, according to HM Revenue & Customs' overview of tax legislation and rates¹. The changes include higher rates on dividend, savings and property income, a longer freeze on the personal allowance, and new duties on vaping products and remote gambling¹.

Dividend tax rates rise from 6 April 2026. The ordinary rate increases by 2 percentage points to 10.75% and the upper rate by 2 percentage points to 35.75%, while the additional rate stays at 39.35%¹. The rate charged on loans to, or benefits conferred on, participators in close companies is aligned to the dividend upper rate, so it also rises². HMRC estimates that by 2029 to 2030, 3.9 million individuals (9% of taxpayers) will pay more tax as a result, while 1.6 million will see no change to the tax on their dividend income².

Savings and property income get separate rates from 6 April 2027¹. The savings basic rate rises to 22%, the higher rate to 42% and the additional rate to 47%, applying across the UK¹. Property income gets its own rates of 22%, 42% and 47% for England, Wales and Northern Ireland, with the government to engage the devolved governments on setting property rates in Scotland and Wales¹. HMRC estimates 3.8 million individuals (9% of taxpayers) will pay more tax on savings by 2029 to 2030, and 2.4 million landlords (6% of taxpayers) more tax on property². From April 2027, reliefs and allowances will be applied to property, savings and dividend income only after other income².

The personal allowance stays at £12,570 and the basic rate limit at £37,700 for 2028-29 to 2030-31, giving a higher rate threshold of £50,270¹. The starting rate for savings limit is retained at £5,000 to 2030-31¹. Remote Gaming Duty rises from 21% to 40% on 1 April 2026, and Vaping Products Duty takes effect on 1 October 2026¹. The annual ISA cash limit will be £12,000 within the £20,000 overall limit, and mandatory monthly digital reporting by ISA managers is postponed to April 2028¹.

Other measures include bringing unused pension funds and death benefits into a person's estate for inheritance tax from 6 April 2027, restricting capital gains tax relief on disposals of shares to employee ownership trusts to 50% of the gain from 26 November 2025, and an employer and employee National Insurance charge on pension contributions above £2,000 a year made by salary sacrifice from 6 April 2027¹. The inheritance tax nil-rate bands stay at £325,000 and £175,000 until 5 April 2031¹.

Why it matters for households

The dividend changes affect people who receive company distributions from 6 April 2026, including many owner-managers paid in dividends rather than salary¹. The savings changes affect interest above the tax-free allowances from 6 April 2027, though most savers pay no tax on savings interest and many have tax collected through their tax code². Landlords in England, Wales and Northern Ireland face the new property rates from the same date, and the change to the order in which allowances are set against income can increase the tax due on savings, dividends and rent for people with more than one source of income². The freeze on the personal allowance and basic rate limit to 2030-31 means more of a rising income falls into higher bands¹. Scottish income tax rates and limits are set by the Scottish Parliament, and Welsh rates by the Senedd¹.

What happens next

The measures are to be legislated in Finance Bill 2025-26¹. Dividend rates apply from 6 April 2026, savings and property rates and the new ordering rules from 6 April 2027, and the pension inheritance tax change from 6 April 2027¹.