Rachel Reeves has confirmed significant tax changes set to take effect from April 6, 2027, impacting millions across the United Kingdom. These changes include a new Vehicle Excise Duty charge for certain vehicles and increased taxes on savings and rental income.
Key details of the tax changes:
- The cash Isa limit will decrease 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 adjustments.
- Higher-rate taxpayers will see their rate increase to 42%, while additional rate taxpayers will face a 47% rate.
- The threshold for Making Tax Digital will fall from £50,000 to £30,000.
Alongside these measures, the government will introduce new charges under the Vehicle Excise Duty scheme. From April 2026, petrol and diesel cars emitting over 255g/km will incur a hefty charge of £5,690. Meanwhile, cars with CO2 emissions below 100g/km will now be subject to an annual fee of just £20. Classic cars built before January 1, 1986, will no longer pay VED but are still required to be taxed.
The standard rate of Vehicle Excise Duty for cars, vans, and motorcycles increased from £195 to £200 in April 2026. Clare Stinton from Evelyn Partners noted that “the countdown is on” as these changes approach. Jason Hollands from Hargreaves Lansdown emphasized that “in a higher-tax environment, how you structure your savings will become even more important than it is now.”
These measures have prompted many landlords to reassess their positions in light of the increased taxation on property income. Kenneth Rowson pointed out that VED is “just another tax imposed on motorists which goes into the general tax pot,” highlighting concerns about fairness in the taxation system.
As these developments unfold, officials have yet to clarify how these changes may impact various sectors or if further adjustments are anticipated before their implementation date.
