Pensions

From 6 April 2027, pensioners with income no higher than the full new State Pension will effectively pay no income tax, regardless of the source of their income. The measure is intended to remove the administrative burden of collecting small amounts of tax where the State Pension exceeds the personal allowance.

However, it does not necessarily remove the need to file a Tax Return, particularly where individuals receive investment or rental income, and the relief will be tapered for those with income above the full State Pension.

The rules are therefore more complex than the headline suggests, and further detail will be needed on how HMRC will ensure the correct relief is given.

Increased tax rates on interest and property income

From 6 April 2027, tax rates on savings interest and property income will rise from 20%, 40% and 45% to 24%, 44% and 49%.

While the latest headlines refer to a 2% increase, this comes on top of the 2% rise already announced at Autumn Budget 2025, resulting in an overall 4% increase.

With investment and property income facing higher tax rates, reviewing whether investments are held as tax-efficiently as possible will become increasingly important.

Payments of income tax

The Government is pressing ahead with plans to move Self Assessment away from large, infrequent tax payments towards smaller payments made throughout the year.

Following consultation with taxpayers and advisers, mandatory collection through PAYE (where taxpayers have sufficient employment and pension income to substantiate the heightened tax payments) has been dropped in favour of automated in-year payments (via direct debit), with PAYE remaining optional for eligible taxpayers.

The precise mechanics are still to be determined, but HMRC plan to introduce digital tools from 2028 to help taxpayers forecast their liabilities and monitor payments.