NEW HIGHER TAX RATES FOR PROPERTY AND DIVIDEND INCOME FROM 2026 AND 2027

Amie Roberts • December 1, 2025

How the 2025 Budget reshapes tax for landlords, investors and business owners

The 2025 Budget introduced a significant shift in how the UK taxes property income and dividends. 

While the Chancellor can still say the “main” income tax rates have not been raised, the picture is very different for landlords, investors, and company owners. 


Two of the most important changes are the new standalone tax rates for property income from April 2027, and the increase in dividend tax rates from April 2026.  These measures sit alongside other reforms to savings income and the ordering of allowances, forming a coordinated move towards taxing investment and rental income more heavily than employment or trading income. 


Below is an overview of what is changing, who is affected by the Autumn Budget, and what this may mean in practice.


New Tax Rates for Property Income (from 6 April 2027)

From the 2027–28 tax year, property income will be carved out into a separate tax banding system. The new rates are:

• Property basic rate: 22%

• Property higher rate: 42%

• Property additional rate: 47%


These will apply in England, Wales and Northern Ireland, with the UK government intending to give Scotland and Wales the scope to set their own property rates in line with their devolved income tax powers. The change covers both UK and overseas rental income received by individuals. Current reliefs such as the property allowance and Rent-a-Room relief remain in place. Interest restrictions continue to operate through a basic rate tax reducer, but will now apply at the higher 22% basic property rate.


Crucially, from 2027 the personal allowance and other reliefs will be set first against employment and trading income before being applied to property, savings and dividends. For many people, this will mean more of their rental income is taxed at the full new rates.


Higher Dividend Tax Rates (from 6 April 2026)

The 2025 Budget also confirmed an increase in dividend tax rates one year earlier, from April 2026:

• Ordinary (basic) dividend rate increases from 8.75% to 10.75%

• Upper (higher) rate rises from 33.75% to 35.75%

• Additional rate remains at 39.35%


The dividend allowance remains in place but continues to fall in real terms, meaning more investors will be paying tax on their portfolio income even before the higher rates take effect. For owner-managers, this makes dividend extraction more expensive and reduces the gap between taking profits as dividends versus salary. For private investors, it increases the value of ISAs, pensions, and other tax-advantaged wrappers.


Who Is Most Affected By The Autumn Budget Tax Changes?

These changes will be felt across a broad group of taxpayers:

• Landlords holding property personally, especially those with geared portfolios

• Individuals with overseas rental income

• Investors with taxable portfolios outside ISAs or pensions

• Owner-managers who extract profits through dividends

• Clients with mixed income streams where allowances currently shelter rental or dividend income


It is worth noting that, although targeted at “unearned” income, the burden will fall heavily on middle-income landlords and owner-managed businesses as well as higher-rate savers.


Other Emerging Themes

There are several themes emerging.

One might describe the measures as a form of “stealth” tax rise: the headline income tax rates are unchanged, but the effective tax pressure on rental and investment income increases sharply.  Additionally, the changes continue a wider pattern of making the private rented sector less attractive for individual landlords, especially when layered on top of finance cost restrictions and tighter regulation. The new property rates add another layer of pressure on residential landlords and may accelerate longer-term trends towards incorporated or institutional ownership. Meanwhile, it is also worth highlighting the increased importance of using ISAs and pensions to shelter dividends, given the higher rates and shrinking allowances.


Practical Points and Planning Considerations

For clients affected by these measures, a review of structure and timing is sensible:

• Bringing forward dividends into the 2025–26 or 2026–27 tax years may reduce exposure to the new rates.

• Landlords should revisit incorporation analysis, especially where mortgages are large or profits are reinvested. While incorporation is not a universal solution, the new property rates change the numbers again.

• Clients with significant rental or investment income will want to make full use of pensions and ISAs before the higher rates apply.

• Mixed-income clients will need to reassess how their personal allowance interacts with their overall income profile from 2027 onwards.

• Cross-border landlords should note that Scotland and Wales may diverge from the rest of the UK when setting their own property income rates.


Conclusion

The new tax rates for property and dividend income represent some of the most consequential personal tax changes in this Budget. While framed as part of a wider effort to “rebalance” the system, they will result in higher tax bills for many landlords, investors and owner-managed businesses. Understanding the timing, structure and interaction with other allowances will be key to managing the impact.


Final Thoughts

If you have any queries about this article on property and dividend income tax changes or tax matters in the UK, then please get in touch below.


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The 4 Best Countries To Move To From The UK in 2026 (HNWI Guide)

By Amie Roberts • January 27, 2026
Introduction More wealthy UK residents are exploring life overseas ahead of the 2026/27 tax year. Higher UK taxes, political uncertainty and a desire for a different way of living are all pushing people to look at alternatives. Four destinations stand out for high-net-worth UK individuals as at late 2025: 1. United Arab Emirates (Dubai) 2. Portugal 3. Switzerland 4. Malta Each offers a different blend of tax advantages, residency options and lifestyle. United Arab Emirates (Dubai) - Dubai is now the default choice for many UK entrepreneurs and professionals. Tax For individuals, there is currently no personal income tax on salaries, bonuses or most investment income, and no local capital gains or inheritance tax regime for individuals. There is VAT and a developing corporate tax regime, but personal tax remains far lighter than in the UK. The UK–UAE double tax treaty helps reduce the risk of the same income being taxed twice and needs to be considered alongside UK residence rules. Residency Common routes for UK nationals include: Employer- or company-sponsored residence visas Remote-worker visas for those employed or self-employed abroad Long-term “golden” style visas linked to investment, property or professional status Retirement options for over-55s. (All require private health insurance and periodic renewal.) Lifestyle Dubai offers a high standard of living, excellent connectivity and a large, well-established British community. Housing and schooling are expensive and the lifestyle can encourage overspending, but for many the tax position and opportunity outweigh the costs. Best for: Maximising net income and building or scaling a business in a dynamic, international city. Portugal - Portugal appeals to those who want EU residency, a milder climate and a slower pace of life. Tax The old NHR regime has closed to new applicants and been replaced by a newer incentive framework (often referred to as IFICI) aimed at certain professionals and activities. The UK–Portugal tax treaty reduces double taxation, and Portugal does not operate a classic wealth tax, though property-related charges can apply. (It's signed and ratified but not yet fully in force as of early 2026, which may slightly affect immediate tax planning). Residency Post-Brexit, common routes for UK nationals include: D7 visa – for those with sufficient passive income (pensions, investments, rentals). D8 / Digital Nomad visa – for remote workers with qualifying income from abroad. Work and other residence visas tied to employment or specific skills. These can lead to long-term residence and, ultimately, citizenship if physical presence and integration tests are met. Lifestyle Cost of living is generally below the UK (though higher in central Lisbon and the Algarve), English is widely spoken in cities, and the public and private healthcare systems are well regarded. There are large British and wider international communities. Best for: Those wanting EU residence, good quality of life and a balance of tax and lifestyle advantages. Switzerland - Switzerland attracts UK families who prioritise security, discretion and top-tier services. Tax Tax is set at federal, cantonal and communal level, so overall rates vary widely by canton. Well-chosen cantons can be very competitive for both individuals and companies. Private capital gains are not generally taxed, but there is an annual wealth tax on net assets, with rules depending on location. For suitable non-working individuals, some cantons still offer lump-sum (forfait) taxation, where tax is based on living costs rather than worldwide income, subject to minimum levels and conditions. Residency As non-EU nationals, UK citizens use: B permits – time-limited residence, often linked to work L permits – short-term residence for specific assignments C permits – longer-term settlement after sustained residence and integration Wealthy retirees and non-working individuals may be able to obtain residence based on financial self-sufficiency and, in some cantons, lump-sum taxation. Lifestyle High costs are offset by excellent infrastructure, schools and healthcare (with compulsory private health insurance). International communities are strong in Zurich, Geneva and other cities, though social life can feel more formal than Southern Europe. Best for: Those seeking stability, discretion and first-class public services and education, rather than the lowest day-to-day costs. Malta - Malta is a compact EU state with a very familiar feel for UK nationals: English is an official language and the legal and business environment is comfortable for British professionals. Tax Malta’s tax system and UK–Malta treaty can be particularly attractive where you hold significant foreign-source income. Under the Global Residence Programme, qualifying individuals can pay a favourable flat rate on foreign income remitted to Malta, while foreign capital gains kept offshore are generally not taxed in Malta. There is no separate wealth tax and no classic inheritance tax, though duties may apply to certain Maltese assets. The separate “golden passport” (citizenship by investment) route has been struck down by the EU’s top court, but residence programmes remain available. Residency Options for UK citizens include: Employer-sponsored Single Permits combining work and residence The Global Residence Programme for financially self-sufficient individuals meeting property and minimum tax thresholds Digital-nomad-style visas for remote workers Long-term residence after several years of compliant stay Lifestyle Costs (especially rent and property) are typically lower than in the UK outside the most fashionable areas. English is widely used in government and business, healthcare is solid, and London is only a short flight away. Best for: Those wanting an English-speaking EU base with favourable treatment of foreign-source income and a tight-knit expat community. How to decide & next steps - All four countries can work extremely well for UK high-net-worth individuals, but for different profiles: Choose Dubai if your priority is low personal tax on active income and you are comfortable with a high-energy city. Choose Portugal if EU residency, climate and lifestyle matter as much as tax. Choose Switzerland if stability, education and healthcare are at the top of your list. Choose Malta if you want an English-speaking EU base with flexible options for foreign income. The right answer depends on your overall wealth, income mix, family plans and how tied you remain to the UK. If you would like bespoke, confidential advice on whether remaining UK-resident or relocating to Dubai, Portugal, Switzerland or Malta is the better strategy for your situation, you are welcome to get in touch to explore your options in detail.

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