Tax changes for 2027/28: what happens on 6 April 2027

Several changes confirmed at Budget 2025 take effect on the same day. If you let a property, hold savings outside an ISA, or have a pension you were planning to leave to your family, at least one of them applies to you.

1. Rental income gets its own tax rates

From 6 April 2027, property income is taxed at its own set of rates in England, Wales and Northern Ireland: 22% basic, 42% higher and 47% additional — two percentage points above the equivalent main rates.

Relief for mortgage interest and other finance costs is given at the property basic rate of 22%.

This is the change landlords should model first. It isn't a tweak to an allowance; it's a different rate applied to the whole of your rental profit, and it applies whether or not you do anything differently.

2. Savings rates rise by two points

Also from 6 April 2027, tax on savings income rises across all three bands: 22%, 42% and 47%.

This only bites once you've used your Personal Savings Allowance, but more people pass that threshold than realise. After several years of higher interest rates, an ordinary emergency fund in an ordinary account can generate enough interest to produce a tax bill for someone who has never had one.

If that's you, the bill goes up on 6 April 2027 without any action on your part. The practical response is to use your ISA allowance for cash you're genuinely leaving put — which brings us to the third change.

3. Making Tax Digital widens to £30,000

The MTD for Income Tax threshold drops from £50,000 to £30,000 of qualifying income, tested against your 2025/26 Self Assessment return.

Qualifying income is gross turnover from self-employment and gross rental income added together, before expenses. A landlord with £18,000 of rent and a small business turning over £14,000 is inside the threshold, whatever the profit.

If you're caught, from April 2027 you keep digital records in compatible software and send HMRC four quarterly updates plus a final declaration, instead of one annual return.

It's the same regime the first wave entered in April 2026, so by then the process will be well established. Our full MTD guide covers how it works →

4. Unused pensions come into inheritance tax

From 6 April 2027, unused pension funds and death benefits form part of your estate for inheritance tax. Personal representatives are responsible for reporting and paying.

For years, a pension was one of the most efficient things to leave behind, precisely because it sat outside the estate. A lot of estate planning was built on that. From April 2027 it no longer holds.

This is the change most likely to affect a decision you already made. If you have been drawing on other assets to preserve a pension for your family, the reasoning behind that is about to change. It's worth a conversation with whoever advises you on it, well before the date rather than after.

5. The cash ISA limit drops to £12,000

The overall ISA allowance stays at £20,000, but from April 2027 no more than £12,000 of it can go into cash. The remainder has to go into stocks and shares to be used at all.

For a saver who puts the full £20,000 into cash each year, that's £8,000 of allowance that now has to be invested or lost — and alongside the savings rate rise, it means more interest falling into the taxable bracket.

What to do before April 2027

1. Landlords: model 2027/28 on the new rates. Work out your actual position before deciding anything. A change this size deserves arithmetic, not a reaction.
2. Check your qualifying income now. Add gross self-employment turnover to gross rent for 2025/26. Over £30,000 means MTD from April 2027.
3. Get into software early if you're caught. Months of using it before anything is due is what makes the first quarterly update uneventful.
4. Use the cash ISA allowance while it's higher. The 2026/27 allowance isn't subject to the £12,000 cap.
5. Revisit any plan built around pensions sitting outside the estate. This is the one with the longest lead time and the biggest consequences.

None of this is urgent today. All of it is easier handled across a year than in the fortnight before April.

This article is general guidance based on the rules as we understand them at the date above, not advice for your situation. Tax rules change and thresholds are often updated at fiscal events — check the current position on GOV.UK or speak to us before acting on anything here.