Savers and landlords hammered with income tax raid in Budget as Healey ratchets up Reeves' hike by another 2%

Updated: 10:45 EDT, 28 October 2026 Chancellor John Healey has mounted a sneaky tax raid on savers and landlords at the Budget. From April 2027, both will pay an extra 4 per cent in income tax on money they receive as savings interest above their personal allowance, and rent they receive from tenants.This is because Healey has imposed a new 2 per cent hike, on top of a 2 per cent hike already imposed by former Chancellor Rachel Reeves in last year's Budget. It means that from April 2027, savers and landlords who are basic rate taxpayers will pay 24 per cent income tax on interest and rents, up from 20 per cent today. Higher rate tax-payers will see their income taxed at 44 per cent, up from 40 per cent today, while additional-rate taxpayers will be taxed at 49 per cent, up from 45 per cent currently.The change will 'represent a material reduction in returns to private landlords' and 'risk leading to a steady rise in rents', according to forecasts by the Office for Budget Responsibility. Savers hammered: Basic rate taxpayers who exceed £1,000 in interest will pay 24% tax There will be no change to the income tax paid by people on earnings from work, with the Government deciding to further hammer those with savings and property instead. The document published alongside the Budget said the Government was 'Seeking an additional contribution from those with taxable income from assets'.The hike was described as a 'fair and proportionate approach'.Some 16 per cent of income tax payers will be affected by the changes, according to Labour's forecast, and it said half the revenue raised would come from the 10 per cent of wealthiest households.Raising income tax on landlords will bring in £455million for the Treasury by the 2031-32 financial year, its forecast suggested, while the hike on savers will raise £590million. Healey has given with one hand and taken away with the other when it comes to savers. He reversed Reeves' cut to the cash Isa allowance, which would have seen it fall from £20,000 to £12,000 from April 2027 for everyone apart from over-65s. However, the additional income tax on savings means that those who have money in non-Isa savings accounts and exceed their personal savings allowance will be taxed more heavily on it. The Personal Savings Allowance is £1,000 for basic rate tax payers and £500 for higher-rate taxpayers, while additional rate payers pay tax on all their savings interest. How much could savers and landlords now pay? A higher rate taxpayer with £20,000 in savings outside an Isa would earn £800 interest in a year, on an account paying 4 per cent. Of that, £500 would be covered by their personal savings allowance, leaving £300 subject to tax. From April 2027, they would pay £132 in tax, leaving them with just £168. This is up from £120 and £180 currently. If a basic-rate tax paying household had £30,000 in savings in a non-Isa account paying 4 per cent, they would earn £1,200 interest in a year - breaching their savings allowance by £200. From April 2027 they would pay £48 tax on that interest, up from £40 today. The Burnham Budget is here... but what does it mean for YOU? Click here to sign up to Simon Lambert's subscriber-exclusive newsletter series and learn exactly how to Protect Your Money. SAVE MONEY, MAKE MONEYUp to £300 cashbackUp to £300 cashback£25-£300 cashback on at least £3004.87% cash Isa4.87% cash IsaTrading 212: 1.27% fixed 12-month bonus£2,500 cashback£2,500 cashback£250-£2,500 cashback when opening SippUp to £150 cashbackUp to £150 cashbackOpen a savings account with at least £5,000Welcome bonusWelcome bonusGet up to £200 when you invest £100Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.