Income tax and self-assessment changes
Whilst the Government has stuck to their manifesto pledge of not raising the rates of income tax for working people, there has been a wide range of smaller changes for the taxation of investment income, self-assessment reporting and payments, which will still impact a significant proportion of taxpayers.
Increase to property and savings income tax rates
From April 2027, the income tax rates for property and savings income will increase by a further 2%, in addition to the higher rates previously announced in November 2025.
The new rates will become:
| Property | Savings | |
| Basic rate | 24% | 24% |
| Higher rate | 44% | 44% |
| Additional rate | 49% | 49% |
The changes to savings rates will apply across the UK, whilst the changes to property income rates will apply to England, Wales and Northern Ireland.
Changes to self-assessment tax payments from April 2029
Self-assessment taxpayers will be required to make automated in-year payments towards their current year income tax liabilities from April 2029.
The changes will apply to those already making payments on account, so for those with income tax liabilities of over £1,000 who have not already had 80% of their liability deducted at source. The new payments to be made from April 2029 will be based on the individual’s income tax liability for the 2027/28 tax year.
Details of the frequency and method of payments are yet to be confirmed, but the Government has agreed that the payments will not be automatically collected via PAYE. Taxpayers with sufficient PAYE income will have the choice to opt into making payments through PAYE if they wish.
Concerns have been raised in the recent consultation into the proposed changes as to how the transition from the existing payments on account system to the new arrangements will be managed. The response from the Government is to recommend taxpayers use HMRC’s expected new web and app functionality (due in 2028) to estimate their liability and consider making voluntary payments. Taxpayers can then track how their payments are covering their forecasted tax liability. This response slightly misses the point that taxpayers may be expected to pay the equivalent of 200% of their tax within a 12-month period.
HMRC are to provide further information and support to taxpayers, agents and payroll operators in advance of implementation in April 2029.
Employment expenses – removal of £2,500 threshold
From April 2028, taxpayers who complete self-assessment returns solely to claim income tax relief for unreimbursed employment expenses will be able to claim relief through the PAYE expenses process. This can be completed via form P87 or online. Claims made via the PAYE expenses process will be subject to providing supporting evidence to prove their eligibility before relief is provided.
Currently, PAYE employment expense claims are subject to a £2,500 threshold.
Making Tax Digital
Late submission penalties will not be applied in 2027/28 to quarterly updates for Making Tax Digital (MTD) for those joining MTD from April 2027.
The Government is also deferring the roll-out of MTD for income tax to several taxpayer groups until further notice. The taxpayer groups impacted that have been identified so far are those eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople and expected non-resident customers.
It has not been confirmed if this will be extended to other taxpayer groups currently deferred for 2026/27 including those with income from trusts and/or estates and partnerships.
