Government quietly confirms change to key tax deduction
The headlines for individuals at last week's Budget were all about the income tax hikes. But the small print contained confirmation of another important change. What’s the full story?
The news that income tax rates for property, interest and dividend income are to be increased was already bad news for taxpayers. However, once the Budget documents were published, a further blow was confirmed. Currently, it is possible for taxpayers to specify the order in which the personal allowance (currently £12,570 until at least 2031) is offset against different types of income. This is going to change from April 2027. The rules concerning the tax calculation will be amended so that general reliefs and allowances will only be applied to property, savings and dividend income after they have been applied to other sources of income. Reliefs and allowances for specific types of income will still apply to those types of income first where relevant.
Note. As well as the personal allowance, this also applies to reliefs and allowances deducted at step 2 or 3 of the calculation, so the Blind Person’s Allowance and Married Couple’s Allowance. It will also apply to trading losses and some types of pension contribution.
Related Topics
-
Deadline to issue P60s
-
HMRC launches new R&D advance assurance process
HMRC has introduced a new advance assurance process for research and development (R&D) tax relief claims, aimed at giving eligible companies greater certainty before submitting a claim. What does the new process involve?
-
Dodging tax and NI on 2025/26 benefits
If you had taxable benefits in kind in 2025/26 then you’ll have to pay income tax on the value. Your company also has to pay 15% NI. Now the tax year has passed is there any way you can reduce or eliminate this tax liability?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.