Month: December 2025

The government announced at Budget 2025 that dividend income, property and savings income, will be subject to new tax rates. These changes will be legislated for through the Finance Bill 2025–26 and will be phased in between April 2026 and April 2027.

Dividend income

From April 2026, most dividend income will be subject to higher rates of tax. The ordinary and upper dividend tax rates will each increase by two percentage points, rising to 10.75% and 35.75%, respectively. The additional rate will remain unchanged at 39.35%.

Property income

From 6 April 2027, new tax rates will apply to property income with an increase of two percentage points in each tax band. This will mean that property income will be taxed at 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers from 2027-28. These rates will apply in England, Wales and Northern Ireland.

The government has stated that it will work with the devolved administrations in Scotland and Wales to facilitate their ability to set their own property income tax rates.

Savings income

Savings income will also be subject to revised rates from 6 April 2027. In line with the changes to property income, the basic, higher and additional rates applicable to savings income will increase by two percentage points to 22%, 42% and 47%, respectively.

The government has confirmed that the existing allowances for savings income will remain unchanged. Basic rate taxpayers will continue to receive up to £1,000 of tax-free interest, while higher rate taxpayers will retain the £500 allowance. The Starting Rate for Savings, which provides up to £5,000 of savings income tax-free for lower earners, will also remain in place.

The June 2025 reforms introduce a £35,000 income limit for keeping the Winter Fuel Payment, with HMRC recovering the payment from those above the threshold.

The WFP is a tax-free payment provided by the government to help older people keep warm during winter. The amount of the payment depends on individual circumstances but ranges from £100 to £300. The amount you receive depends on a number of factors including your age and the age of other people living with you.

Pensioners whose taxable income exceeds £35,000 will still receive payment but this will be recovered in full by HMRC using the new WFP tax charge. The recovery will be handled through PAYE tax‑code adjustments or the self-assessment return, depending on the taxpayer’s circumstances.

The threshold applies to individuals, not household income. This means that in some couples, one person may keep their payment while the other has theirs reclaimed, depending on individual incomes. Individuals in receipt of certain social security benefits in the qualifying week for winter payments will not be liable to the charge, regardless of income. 

HMRC has published a new Making Tax Digital newsletter. This newsletter is mainly intended for taxpayers and agents who are currently testing the Making Tax Digital for Income Tax (MTD for IT) system. MTD for IT will become mandatory in phases from April 2026.

For nearly two years, HMRC has been stress-testing its MTD for IT systems to ensure they can support increasing numbers of volunteer taxpayers. So far, HMRC has confirmed that testing has successfully deal with:

• The sign-up process works for individuals and agents, including those with non-standard accounting periods.
• Volunteers can make and edit quarterly submissions and add income sources.
• Volunteers can opt out of quarterly obligations.
• PAYE income pre-populates into estimated payments on account.
• Payments are correctly allocated within MTD for IT.

More recent testing in 2025 as HMRC scales up the rollout include:

April–June 2025

• Re-testing sign-up to confirm it can cope with larger volumes.
• Testing the ability for volunteers to appoint multiple agents (one for quarterly returns and one for end-of-year submissions).

July–September 2025

• Ensuring taxpayers and agents can make their first quarterly update via software completing the quarterly requirement.
• Checking the accuracy of estimated payments on account based on income to date.
• Testing key functions in the digital tax account, such as adding or stopping income sources and opting in or out of the service.

During the testing phase, there are no penalties for late submissions, but submitting on time is encouraged by HMRC as it helps those testing the system understand the requirements and allows for the service to be properly stress tested.

If your qualifying income is over £50,000 in the 2024–2025 tax year, you will be required to start using MTD for IT from 6 April 2026. There are some minimal exemptions in place.

There is now less than 1 months to the self-assessment filing deadline for submissions of the 2024-25 tax returns. We urge our readers who have not yet completed and filed their 2024-25 tax return to file as soon as possible to avoid the stress of last-minute preparations as the 31 January 2026 deadline fast approaches.

You should also be aware that payment of any tax due should also be made by this date. This includes the remaining self-assessment balance for the 2024-25 tax year, and the first payment on account for the 2025-26 tax year.

Earlier this year, more than 11.5 million people submitted their 2023-24 self-assessment tax returns by the 31 January deadline. This included 732,498 taxpayers who left their filing until the final day and almost 31,442 that filed in the last hour (between 23:00 and 23:59) before the deadline!

There is a new digital PAYE service for the High Income Child Benefit Charge (HICBC). This allows Child Benefit claimants who previously used self-assessment solely to pay the charge to opt out and instead pay it through their tax code.

If you are filing online for the first time you should ensure that you register to use HMRC’s self-assessment online service as soon as possible. Once registered an activation code will be sent by mail. This process can take up to 10 working days. 

If you miss the filing deadline you will be charged a £100 fixed penalty (unless you have a reasonable excuse) which applies even if there is no tax to pay, or if the tax due is paid on time. There are further penalties for late tax returns still outstanding 3 months, 6 months and 12 months after the deadline. There are additional penalties for late payment of tax amounting to 5% of the tax unpaid at 30 days, 6 months and 12 months.