Rachel Reeves has confirmed significant tax changes that will affect millions in the UK, including a new charge for certain cars and increased taxes on savings and rental income starting from April 6, 2027.
The changes come as part of a broader strategy aimed at addressing fiscal challenges. The government aims to increase revenue through various means, which now include adjustments to Vehicle Excise Duty (VED) and income tax rates. These alterations are not merely bureaucratic—they have real implications for everyday citizens.
Key changes include:
- The cash Isa limit will be reduced from £20,000 to £12,000 for individuals under 65.
- Income tax rates on savings and rental income will rise by 2 percentage points.
- Basic-rate taxpayers will pay 22% on interest or property income after the changes.
- Higher-rate taxpayers will face a rate of 42%, while additional rate taxpayers will pay 47%.
These adjustments could reshape how many people manage their finances. Jason Hollands from Evelyn Partners noted, “In a higher-tax environment, how you structure your savings will become even more important than it is now.” This sentiment resonates with many who may need to rethink their strategies in light of these new realities.
The Vehicle Excise Duty is also seeing notable shifts. Starting in April 2026, certain cars with CO2 emissions below 100g/km will incur an annual charge of £20. Meanwhile, petrol and diesel vehicles emitting over 255g/km registered after April 1, 2026, will face hefty costs of £5,690. Classic cars built before January 1, 1986, will not pay VED but must still be taxed—a point Kenneth Rowson emphasized: “VED has nothing to do with road tax and is just another tax imposed on motorists which goes into the general tax pot.”
Moreover, the threshold for Making Tax Digital—a system intended to streamline tax reporting—will drop from £50,000 to £30,000. This change could affect many small businesses and self-employed individuals who previously operated below this threshold.
The implications of these measures are vast and varied. Many landlords are already reassessing their positions in light of increased taxation on rental income. The countdown is on—April 2027 looms large for those impacted by these changes.