What the Income Tax Rate Rises From April 2027 Mean for Your Take-Home Pay

UK taxes and reporting have undergone a variety of changes in recent years. In April 2027, this will change again as tax rates are set to increase. 

While the headline of the changes may not sound too intimidating, every employee and business needs to consider what these rises mean. In this blog, we’ll explain what’s set to change and who will be impacted. Whether you are a business or an employee, this information is important to understand.

What’s Changing for Income Tax Rates in April 2027?

The start of the 2027/28 tax year will see the biggest change since 2016. The main difference is that tax rates for savings and property income will all increase by 2 percentage points. Rates will therefore rise from:

Basic rate: Increased to 22% (from 20%)

Higher rate: Increased to 42% (from 40%)

Additional rate: Increased to 47% (from 45%)

While there are changes coming in, this will not impact employees who solely earn PAYE income. The changes are instead aimed at higher taxation for both savings and property profits, such as income for landlords. Someone who earns a salary through PAYE alongside savings or property income could therefore see their overall tax bill increase, although the higher rates will apply to the relevant savings or property income rather than to their entire combined income. 

It’s also important to note that the impact on take-home earnings will depend on factors such as taxable savings. This is an element that requires careful tax planning, as even with these changes, totals can be offset by making the right preparations. For example, basic taxpayers can currently earn up to £1,000 of tax- free savings and higher-rate taxpayers can bring in £500. Reviewing this allowance carefully in the new tax years could reduce overall tax liabilities.

What Can Businesses Do to Prepare Staff for Income Tax Rate Rises?

To avoid panic for employees, we believe all businesses should share this information. This will help to clarify that these changes don’t impact their income tax on PAYE employment. The key thing to let teams know is that anyone with additional income will likely be impacted. 

Businesses should also:

• Educate payroll and HR teams with the information relating to changes to ensure only the correct information is shared with employees.
• Provide access to any official documentation relating to these changes. These can be found on the HMRC website, or your company accountant should be able to share details with you.
• Review their current taxable-benefits structure to see whether the company can offer more options for staff who may wish to make changes.

While this responsibility does not sit directly with businesses, each company does have a duty of care to its staff. At Hysons, we provide both corporate and personal tax advice meaning we are perfectly situated to help teams navigate these changes. Whether you want professional input on how best to manage income tax or general business accounting support, we can help you.

Please contact our Hampshire-based team today to learn more.