From April 2028 homeowners whose property is worth more than £2 million will be subject to a surcharge alongside their usual council tax bill.
The surcharge will depend on the value of the property and are as follows:
| Threshold | Rate (per annum) |
|---|---|
| £2.0m to £2.5m | £2,500 |
| £2.5m to £3.5m | £3,500 |
| £3.5m to £5.0m | £5,000 |
| £5.0m + | £7,500 |
These charges are expected to increase in line with CPI inflation each year.
In addition, it should be noted that the surcharge will only apply to homeowners, not occupiers.
Increase in Tax Rates
From April 2026 the tax rate on dividends will increase. Then, from April 2027 tax on savings and property income will increase.
The increases will be as follows:
| Effective date | Income Type | Current rates | Increased rates |
|---|---|---|---|
| April 2026 | Dividend income | Basic rate 8.75% Higher rate 33.75% Additional rate 39.35% | Basic rate 10.75% Higher rate 35.75% Additional rate 39.35% |
| April 2027 | Savings income | Basic rate 20% Higher rate 40% Additional rate 45% | Basic rate 22% Higher rate 42% Additional rate 47% |
| April 2027 | Property income | Basic rate 20% Higher rate 40% Additional 45% | Basic rate 22% Higher rate 42% Additional rate 47% |
In addition to the above, the rules are being changed around how the Personal Allowance can be used. Previously it was possible to allocate the Personal Allowance against income in the most advantageous way for the taxpayer. However, from April 2027 this is being changed and instead the Personal Allowance must first be offset against employment income, trading income or pension income. The result of this is that you cannot first use it to cover the above sources of income, which will be subject to higher tax rates than, for example, employment income.
Freeze on Tax Thresholds
It was announced that the income tax thresholds and equivalent National Insurance thresholds for employees and self-employed individuals will be frozen further at their current rates. The freeze in thresholds was previously in place until April 2028, however, it has now been extended to April 2031. The basic rate tax band is currently £37,700.
The thresholds relate to the point at which certain higher rates kick in, for example, when a taxpayer falls into higher rate tax. By freezing these thresholds, it will mean that more individuals will fall into higher rates of tax as their salary increased with inflation.
State Pension and Simple Assessment
Currently pensioners whose sole income is the basic or new state pension have to pay tax on the amount that exceeds their Personal Allowance via Simple Assessment; given the planned increases in state pension this will put more pensioners into Simple Assessment. The government will be exploring the best way to remove this administration burden, with the resolution planned to come into effect from the 2027/28 tax year.
If you have any questions about how the budget might affect you, do get in touch on 01242 776000 or tax@randall-payne.co.uk.
