Rachel Reeves has confirmed significant tax changes that will affect millions in the United Kingdom starting from April 6, 2027. These changes include a new charge for certain vehicles and increased taxes on savings and rental income.
The adjustments come as part of broader fiscal reforms aimed at addressing budgetary challenges. The government has proposed raising income tax rates by two percentage points on savings income and property income. Basic-rate taxpayers will now face a 22% tax rate, while higher-rate taxpayers will see their rate rise to 42%, and additional rate taxpayers will pay 47%.
Key changes include:
- The cash Isa limit will decrease from £20,000 to £12,000 for individuals under 65.
- Income tax rates on savings and rental income will increase by 2 percentage points.
- The threshold for Making Tax Digital will drop from £50,000 to £30,000.
Jason Hollands from Evelyn Partners noted that “in a higher-tax environment, how you structure your savings will become even more important than it is now.” Many landlords are also reassessing their positions given these changes.
In addition to personal finance impacts, vehicle owners will face new charges under the revised Vehicle Excise Duty (VED). Starting in April 2026, certain cars will incur a £410 charge. Cars with CO2 emissions below 100g/km will now pay an annual fee of £20.
New VED rates include:
- Petrol and diesel cars emitting over 255g/km registered after April 1, 2026, will face costs of £5,690.
- Classic cars built before January 1, 1986, will no longer pay VED but still need to be taxed.
- Electric vehicles will pay just £10 in addition to the standard rate of VED.
Kenneth Rowson expressed his frustration: “VED has nothing to do with road tax and is just another tax imposed on motorists which goes into the general tax pot.” As these changes approach, many are left wondering how they will adapt to the evolving financial landscape.
