Autumn Budget 2025 got most of its property tax headlines from the 2p rise in property income tax and the new mansion tax on high-value homes. Sitting quietly alongside both, taking effect the same month, is a matching 2p rise in the tax rates on savings income. It gets less attention because most people think of it as a savers' issue rather than a property one. For anyone lending money into their own company, or holding cash between deals, it is not.
What actually changed
From 6 April 2027, the Income Tax rates that apply to savings income, interest, in plain terms, rise by two percentage points across every band:
- Basic rate: 20% rises to 22%
- Higher rate: 40% rises to 42%
- Additional rate: 45% rises to 47%
The Personal Savings Allowance is untouched: £1,000 of interest a year stays tax-free for basic rate taxpayers, £500 for higher rate taxpayers, and additional rate taxpayers continue to get no allowance at all. The 0% starting rate for savings, worth up to £5,000 for people with very low other income, also stays as it is. What changes is purely the rate charged on interest above those thresholds.
Why it belongs in the same conversation as the property income tax rise
The government designed these two changes as a pair. Both take effect in April 2027, both add 2p to every band, and both sit alongside the equivalent rise in dividend tax that arrives a year earlier, in April 2026. The stated aim across all three is the same: narrow the gap between how income from work is taxed and how income from capital, rent, interest and dividends, is taxed. Taken together they represent a genuine, multi-year shift rather than an isolated Budget measure, and a property investor who only tracks the rental income change is looking at one third of the picture.
Where property investors actually hold interest-bearing cash
Interest income does not usually sit at the centre of a property investor's tax planning the way rental profit or Capital Gains Tax does, but it turns up in more places than most people realise:
- Directors' loan accounts in credit. A director who has lent money into their own SPV, to fund a deposit or bridge a cash flow gap, and charges the company interest on that loan, receives interest income personally. It is common practice, and entirely legitimate, but it is taxed as savings income and will cost more from April 2027.
- Private bridging and development finance. Individuals who lend directly to a developer, rather than through a company or fund, receive loan interest as personal savings income, taxed at their marginal rate under the new bands.
- Cash held between transactions. Proceeds from a sale sitting in a personal deposit account while the next purchase is arranged, particularly where a chain delay or a slow refinance stretches that gap, generates interest that is now taxed a little more heavily.
None of this changes how interest earned inside a company is taxed. A limited company's deposit interest is taxed under Corporation Tax loan relationship rules, not as personal savings income, so cash sitting on a company balance sheet is entirely unaffected by this rise. The distinction matters because it is the same pattern as the dividend and property income changes: the increase lands on income received by individuals, not on profit retained inside a company structure.
The link to CT61 withholding tax
Where a property company pays interest to a director or another individual lender, it generally has to withhold Income Tax at the basic rate under the CT61 procedure and account for it to HMRC quarterly, with the lender then settling the balance, or reclaiming any overpayment, through their own tax return. The mechanics of that withholding do not change. What changes is the rate used in the lender's own final calculation: from April 2027, a basic rate taxpayer's true liability on that interest is 22% rather than 20%, so anyone relying on the CT61 withholding as a rough proxy for the final bill should expect a small top-up due through Self Assessment where their marginal rate now sits above what was withheld.
What is worth reviewing before April 2027
Nothing about this change demands urgent action, but it is a reasonable prompt to look at a few things while there is time. Check whether interest on a directors' loan account is set at a sensible commercial rate, given the company gets Corporation Tax relief on interest paid while the director now faces a slightly higher personal charge on receiving it. Confirm whether cash sitting in a personal account between deals could sit inside an ISA instead, bearing in mind the cash ISA subscription limit is itself falling from £20,000 to £12,000 from the same date, which narrows how much of that cash can be sheltered. And if you are a private lender to developers rather than a borrower, factor the higher net-of-tax return requirement into pricing new lending from 2027 onward rather than after the rate has already changed.
Common questions
What are the new savings income tax rates from April 2027?
From 6 April 2027, tax on savings income rises by 2 percentage points across every band: the basic rate rises from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%. The change was announced at Autumn Budget 2025 and mirrors the equivalent rise in tax on property income taking effect the same month.
Does the savings rate rise affect the Personal Savings Allowance?
No. The Personal Savings Allowance, £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, with no allowance for additional rate taxpayers, is unchanged for 2027/28, as is the 0% starting rate for savings available to those with low other income. Interest within these allowances stays tax-free regardless of the rate rise.
Does the savings income tax rise affect interest a property company earns on its own cash?
No. Interest earned by a limited company on its own bank deposits is taxed under Corporation Tax loan relationship rules, not as personal savings income, so this rise does not touch it. It only affects interest received by individuals personally, including a director who has lent money to their own company and charges it interest.
How does this interact with the CT61 withholding tax on directors' loan interest?
Where a property company pays interest to a director or other individual lender, it must generally withhold basic rate Income Tax under the CT61 procedure and pay it to HMRC, with the lender then accounting for the balance, or reclaiming any excess, through their own tax return. From April 2027, the basic rate used in that final personal calculation rises to 22%, so a director receiving loan interest will owe more through their return even though the CT61 withholding mechanics themselves stay the same.
Kieran Holsgrove is a Director and Co-Founder of Grafene Accounting, the property tax specialist firm based in Liverpool. He advises property developers, investors and landlords across Merseyside, Greater Manchester, Lancashire and Cheshire on tax structuring, developer VAT, SDLT and the long-view decisions that compound over the life of a portfolio.
This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.