Tax on savings income from 6 April 2027 - Landlords Financial | Landlords Bookkeeping Accountants
There are changes ahead for savers. From 6 April 2027, savings income will have its own tax rates – the savings income tax rates. Where savings income is not sheltered by the personal allowance or the savings allowance or taxable at the savings starting rate, for 2027/28 it will be taxed at the savings basic rate of 22% where it falls in the basic rate band, at the savings higher rate of 42% where it falls in the higher rate band and at the savings additional rate of 47% where it falls in the additional rate band. Changes to the ordering rules mean that trading, employment and pension income is taxed before property, savings and dividend income, with savings income treated as the second top slice before dividend income. Reliefs and allowances are allocated in the same order.
Basic and higher rate taxpayers will still benefit from the savings personal allowance, set at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. The savings starting rate of 0% will continue to apply to savings income which falls within the savings starting rate band, set at £5,000 but reduced pound for pound to the extent that taxable non-savings income exceeds £5,000. For example, if a taxpayer has pension income of £14,000 and savings income of £5,000, their savings starting rate band would be reduced by £1,430 (£14,000 – £12,570) to £3,570.
For taxpayers looking to shelter their savings income from tax by investing in an ISA, it should be noted that the cash ISA limit for under 65s is reduced to £12,000 for 2027/28. The overall ISA limit remains at £20,000, but at least £8,000 must be invested in a stocks and shares ISA. Further, any savings income on cash held in a stocks and shares ISA will be taxed at the savings income tax rates. The lower cash ISA limit of £12,000 does not apply to individuals who are aged 65 or older at the end of the tax year who can still invest their full £20,000 limit in a cash ISA.
Tax on savings income from 6 April 2027 - Landlords Financial | Landlords Bookkeeping Accountants
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