The UK Budget 2026 is important for issues that apply UK-wide or in England. Outside of these things, we must look at Budgets in the devolved nations which are held after the UK Budget (on 28 October 2026).
These dates have been set as:
- In Scotland, the Draft Budget will be published on 03 December 2026 (with Stages 1 to 3 scrutiny through to February 2027). Although Scotland can vary the rates and thresholds of Income Tax payable on non-savings and / or non-divided income, Income Tax is not a devolved tax; and
- In Wales, the Draft Budget will be published on 17 November 2026 (with the Final Budget on 16 February 2027 after a period of scrutiny). Wales can only vary the rates of income Tax payable on non-savings and / or non-divided income and, like Scotland, Income Tax is not a devolved tax
Which leads to the consideration that the UK Budget 2025 announced Income Tax on property income will change from tax year 2027/28. This was legislated via Finance Act 2026 and gives the following rates of Income Tax applicable to property income:
- Basic rate 22% (20% in 2026/27);
- Higher rate 42% (40% in 2026/27); and
- Additional rate 47% (45% in 2026/27)
The 2026 legislation also gives the Scottish Parliament and Welsh Senedd powers to set their own rates for Income Tax on property income. These powers will be like the Income Tax powers they have on employment income, where Scotland has seven rates and Wales have three.
Income Tax rates on savings also increase to 22%, 42% and 47%, though Income Tax rates on dividends remains unchanged.
So, income is taxable at various rates and subject to various regimes, all depending on the source. The table below also shows the hierarchy of taxation, with income from employment first, then income from property followed by income from savings and dividends.
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Income source
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Rate
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Employment
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As per sharing arrangements with the Scottish Parliament and Welsh Senedd (Scottish Income Tax and Welsh Rates of Income Tax)
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Property
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As per the above Property Income Tax regime which is shared with the devolved nations from tax year 2027/28
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Savings
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Not shared and taxable as follows:
- Basic rate 22% (20% in 2026/27);
- Higher rate 42% (40% in 2026/27); and
- Additional rate 47% (45% in 2026/27)
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Dividend
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Not shared and taxable as follows:
- Basic rate 10.75%;
- Higher rate 35.75%; and
- Additional rate 39.35%
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For Bookkeepers
The Scottish and Welsh Budgets have another shared tax for you to consider. Property tax is not a devolved tax.
Where you offer payroll as a service, you will be concerned with information from employment. Where this service is expanded to look after income from other sources, consider the Income Tax rate changes from next year and how this will form part of the Scottish and / or Welsh Budgets.
HMRC’s Policy Paper, replicated in legislation, sets out the changes to the calculation of Income Tax and how allowances are used. From tax year 2027/28, the Personal Allowance will be deducted from employment income which is regarded as ‘other’, i.e. income that is not from property, savings or dividends. Remaining reliefs and allowances are then applied to property, savings and / or dividends income ‘in the way which is most beneficial for an individual’.
Note that tax on property income should not be confused with the following which are all to do with the purchase of a property: