The government has announced plans to increase income tax rates on property, savings, and dividends in its Autumn Budget.

In the Budget, Chancellor, Rachel Reeves, revealed several changes to the non-labour components of income tax, with the measures estimated to raise a combined £2.1bn a year by 2029/30.

From April 2026, the basic and higher rates of tax on dividends will rise by 2 percentage points to 10.75 per cent and 35.75 per cent respectively, which is forecast to yield £1.2bn a year on average from 2027/28.

The basic, higher, and additional rates of savings income tax will be increased by 2 percentage points from April 2027 to 22 per cent, 42 per cent, and 47 per cent respectively, to raise an estimated £500m a year from 2028/29.

Finally, the basic, higher, and additional rates of property income tax will also rise by 2 percentage points from April 2027, rising to 22 per cent, 42 per cent, and 47 per cent respectively.

The changes to property income tax rates are expected to yield an average of £500m a year from 2028/29.

“These changes will drive changes to behaviour,” said Nucleus technical director, Andrew Tully.

“Small business owners may want to reconsider how best to extract money from their business and the balance between salary, dividends and pension contributions.

“For savings it highlights the importance of using tax efficient wrappers such as ISAs, pensions and investment bonds.”

Commenting on the increase in dividend tax rates, Hargreaves Lansdown head of personal finance, Sarah Coles, said: “Income investors have already been hit with a succession of horrible cuts in the annual dividend allowance.

“It fell from £5,000 to £2,000 back in April 2018, then it was slashed to £1,000 in April 2023 and just £500 in April 2024. To make matters worse, the dividend tax rate was hiked in April 2022 too – up 1.25 percentage points for every tax bracket.

“This tax attack on dividends flies in the face of the government’s desire to encourage investors to hold UK equities.

“Given that the London market is home to so many good income stocks, it means particularly harsh tax treatment if they hold any of these investments outside an ISA or SIPP. It risks persuading investors to take their money elsewhere, or putting them off investments entirely.

“The UK is already underinvested. The tax system needs to be built to support investors, rather than punishing them and turning them away."

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