Savings tax rates rise 2 points, costing 12% of taxpayers £113 on average

The government will raise savings income tax rates by 2 percentage points from 6 April 2027, lifting the higher rate to 44% and the additional rate to 49%.

The savings basic rate rises to 24%, and the new rates apply across the UK, HM Revenue and Customs and the Treasury said.

Around 12% of taxpayers will see an average tax rise of £113 in 2027 to 2028 because of the higher savings rates, the departments said.

Most taxpayers are not liable to tax on savings income, and most of those who are have the tax deducted automatically through PAYE, the departments said.

The Treasury said the change supports its commitment to “fiscal discipline” and ensures that help for households and businesses is fully funded.

The rates already set in law for 2027-28 are lower, at 22% basic, 42% higher and 47% additional, so the Budget change adds 2 points to each.

For 2025-26, the savings rates in law are 20% basic, 40% higher and 45% additional, so the 2027 rates will sit 4 points above them.

By 2031 to 2032, 6 million individuals, or 13% of taxpayers, are projected to face higher tax, being those with savings income above the tax-free allowances.

That projection compares with the 12% of taxpayers expected to see a rise in 2027 to 2028, and it is a forecast rather than a count.

The departments said a basic rate taxpayer making full use of the Starting Rate for Savings and the Personal Savings Allowance would need over £150,000 in savings held outside an ISA, paying 4%, to start paying tax on interest.

People aged 55 or above are overrepresented among those affected, making up 63% of the group against 39% of the UK adult population.

Men are slightly overrepresented too, at 54% of those affected compared with 49% of UK adults, the departments said.

The Exchequer is expected to gain £15m from the savings measure in 2026-27 and £125m in 2027-28, as the change begins to take effect.

The gain then rises to £555m in 2028-29 and reaches £590m in 2031-32, figures that have been certified by the Office for Budget Responsibility.

Property income is on the same timetable, with rates of 24%, 44% and 49% from 6 April 2027, which will affect landlords as well as savers.

Around 5% of taxpayers will see an average rise of £225 in 2027 to 2028 from the property change, and 2.4 million landlords are projected to be affected by 2031 to 2032.

Legislation will be introduced in the Finance Bill 2026-27, and affected savers will not need to do anything differently but will need to be aware of the change.

Tax will be reported and paid through existing self-assessment or PAYE channels, and the measure is not expected to have any significant macroeconomic impact.

The government said the change will be monitored through information collected from tax receipts.