Chancellor John Healey has mounted a sneaky tax raid on savers and landlords at the Budget.
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Healey → mount → Budget
From April 2027, both will pay an extra 4 per cent in income tax on money they receive as savings interest above their personal allowance, and rent they receive from tenants.
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they → pay → tenants
This is because Healey has imposed a new 2 per cent hike, on top of a 2 per cent hike already imposed by former Chancellor Rachel Reeves in last year's Budget.
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Healey → impose → Budget
It means that from April 2027, savers and landlords who are basic rate taxpayers will pay 24 per cent income tax on interest and rents, up from 20 per cent today.
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who → mean → cent
Higher rate tax-payers will see their income taxed at 44 per cent, up from 40 per cent today, while additional-rate taxpayers will be taxed at 49 per cent, up from 45 per cent currently.
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taxpayers → see → cent
The change will 'represent a material reduction in returns to private landlords' and 'risk leading to a steady rise in rents', according to forecasts by the Office for Budget Responsibility.
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change → represent → Responsibility
Savers hammered:
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Savers → hammer → ?
Basic rate taxpayers who exceed £1,000 in interest will pay 24% tax
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who → exceed → tax
Landlords pay tax on the income they receive from rent after any deductible expenses such as repairs, agents' fees and insurance.
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they → pay → repairs
There will be no change to the income tax paid by people on earnings from work, with the Government deciding to further hammer those with savings and property instead.
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Government → pay → savings
The document published alongside the Budget said the Government was 'seeking an additional contribution from those with taxable income from assets'.
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Government → publish → assets
The hike was described as a 'fair and proportionate approach'.
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hike → describe → approach
Some 16 per cent of income tax payers will be affected by the changes, according to Labour's forecast, and it said half the revenue raised would come from the 10 per cent of wealthiest households.
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revenue → affect → households
Raising income tax on landlords will bring in £455million for the Treasury by the 2031-32 financial year, its forecast suggested, while the hike on savers will raise £590million.
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hike → raise → 590million
Healey has given with one hand and taken away with the other when it comes to savers.
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it → give → savers
He reversed Reeves's cut to the cash Isa allowance, which would have seen it fall from £20,000 to £12,000 from April 2027 for everyone apart from over-65s.
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it → reverse → over-65s
However, the additional income tax on savings means that those who have money in non-Isa savings accounts and exceed their personal savings allowance will be taxed more heavily on it.
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who → mean → it
The Personal Savings Allowance is £1,000 for basic rate tax payers and £500 for higher-rate taxpayers, while additional rate payers pay tax on all their savings interest.
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payers → pay → interest
John O’Connell, chief executive of the TaxPayers' Alliance, said: 'Deciding to target savings and productive investment means even more punishment for people doing the right thing, and a drag on much-needed growth.'
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Deciding → say → growth
Jason Hollands, managing director at wealth management firm Evelyn Partners, said it was more important than ever for savers to make use of tax-free allowances.
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savers → say → allowances
He said: 'The message for savers is clear: the tax landscape is set to become tougher in the foreseeable future.
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landscape → say → future
For many households, a rising tax bill is another cost-of-living pressure.
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bill → rise → living
This underlines the importance of making effective use of available allowances, including Isas and pensions, and seeking sound financial planning advice to navigate the changes ahead.
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This → underline → changes
How much could savers and landlords now pay?
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savers → pay → much
A higher rate taxpayer with £20,000 in savings outside an Isa would earn £800 interest in a year, on an account paying 4 per cent.
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taxpayer → earn → cent
Of that, £500 would be covered by their personal savings allowance, leaving £300 subject to tax.
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500 → cover → tax
From April 2027 they would pay £132 in tax, leaving them with just £168.
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they → pay → 168
If a basic-rate tax paying household had £30,000 in savings in a non-Isa account paying 4 per cent, they would earn £1,200 interest in a year – breaching their savings allowance by £200.
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they → pay → 200
From April 2027 they would pay £48 tax on that interest, up from £40 today.
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they → pay → 40
For landlords, who will generally make much more, the impact will be more severe.
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impact → make → more
A landlord who is a basic rate taxpayer and gets £12,000 of income from rent each year after expenses currently pays £2,400 in income tax.
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who → get → tax
For a higher rate taxpayer landlord receiving the same amount in rent, the tax bill would rise from £4,800 today to £5,280 from April 2027.
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bill → receive → April
The Burnham Budget is here... but what does it mean for YOU?
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it → mean → YOU
If you take out a product This is Money may earn a commission.
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This → take → commission
These deals are chosen by our editorial team, as we think they are worth highlighting.
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they → choose → team
This does not affect our editorial independence.
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This → affect → independence
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Terms → apply → offers
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