The headline Income Tax rates may be unchanged, but the detail still matters. For higher earners, reviewing how income, pensions and investments fit together can help keep long-term financial plans on track.
The Personal Allowance taper and additional-rate threshold
The main Income Tax rates remain unchanged for 2027/28, with the 45% additional rate applying to income such as earnings and pensions above the £125,140 threshold in England, Wales and Northern Ireland. Separate rates apply to dividends and, from April 2027, savings and property income. Scotland sets its own rates and bands for earnings and pension income.
The Personal Allowance falls by £1 for every £2 of adjusted net income above £100,000, disappearing entirely at £125,140.
For those whose additional income is taxed at the 40% main higher rate, the Personal Allowance taper can create an effective marginal Income Tax rate of 60% within this range in England, Wales and Northern Ireland. The effective rate can differ for dividends, savings and property income.
Importantly, the calculation isn’t based on salary alone. Bonuses, dividends and other taxable income can also affect your position.
For those approaching or exceeding £100,000 of adjusted net income, qualifying pension contributions and Gift Aid donations may help manage the impact, depending on individual circumstances.
Childcare: another reason the £100,000 threshold matters
The Budget did not change the £100,000 adjusted net income limit for Tax-Free Childcare or England’s working-parent funded childcare entitlement. This section is a reminder of existing rules, rather than a new Budget measure. For parents with young children, the £100,000 adjusted net income threshold can affect more than their Personal Allowance.
If either parent expects adjusted net income above £100,000 for the tax year, the family will not qualify for Tax-Free Childcare or, in England, the working-parent funded childcare entitlement. This is an individual income limit, rather than a combined household limit, and the loss of eligibility is not gradually tapered.
The universal 15 hours of funded childcare for three- and four-year-olds in England remains available regardless of parental income.
For those approaching the threshold, reviewing bonuses, other taxable income and qualifying pension contributions may therefore be particularly important. Other eligibility conditions apply, and funded childcare arrangements differ across the UK.
Pension allowances remain unchanged
The standard pension Annual Allowance remains at £60,000.
Higher earners may also be affected by the tapered Annual Allowance, which can restrict the amount that can be contributed to pensions without an additional tax charge.
The taper applies where both threshold income exceeds £200,000 and adjusted income exceeds £260,000.
Pensions can remain valuable for retirement planning and, where appropriate, managing taxable income. Employer contributions count towards the Annual Allowance, and unused allowance from the previous three tax years may be available through carry forward.
It’s worth checking your available allowances and the relevant tax rules before making a substantial contribution.
A reminder about pension salary sacrifice changes
From 6 April 2029, the National Insurance advantages of making pension contributions through salary sacrifice will be restricted.
Under the previously announced changes, only the first £2,000 of annual pension contributions made through salary sacrifice will remain exempt from National Insurance. Both employees and employers will pay National Insurance on contributions above this amount.
Importantly, Income Tax relief on pension contributions will remain unchanged, and ordinary employer pension contributions outside salary sacrifice arrangements will continue to be exempt from National Insurance.
Salary sacrifice can therefore remain a valuable way of building retirement savings and managing taxable income, although the changes may reduce its financial advantages for those making larger contributions.
Pensions and estate planning: an existing reform to revisit
From 6 April 2027, most unused pension funds and pension death benefits will be brought within the scope of Inheritance Tax when someone dies.
This is a previously announced reform, rather than a new Autumn 2026 measure, but it represents an important change for those using pensions as part of their wider estate planning.
Being within scope does not automatically mean Inheritance Tax will be payable: relevant allowances and exemptions, including the spouse or civil partner exemption where applicable, still matter. Death-in-service benefits from registered pension schemes and certain dependants’ scheme pensions are excluded.
For higher earners with substantial pension savings, it may be worth reviewing pension beneficiaries, wills and how pension assets fit alongside other investments and family wealth.
Higher taxes on savings and rental income
The Budget announced further increases to the tax rates applying to savings interest and rental income from 6 April 2027.
Subject to the relevant legislation, the announced rates are:
- 24% for basic-rate taxpayers;
- 44% for higher-rate taxpayers; and
- 49% for additional-rate taxpayers.
The savings income rates will apply across the UK, while the property income rates will apply in England, Wales and Northern Ireland, subject to devolved arrangements.
For those holding substantial cash balances outside tax-efficient accounts, or receiving income from personally owned rental properties, the changes could increase their annual tax liability.
The Personal Savings Allowance remains at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers, while additional-rate taxpayers have no allowance.
The Government has also announced that the £20,000 annual Cash ISA allowance will be retained, rather than reduced as previously planned for under-65s. This remains part of the overall £20,000 annual ISA subscription limit. Implementation of the Budget announcement is subject to the relevant regulations.
For higher earners, these announcements reinforce the importance of reviewing where savings and investments are held, alongside the balance between accessible cash and longer-term investments.
High-value homes: looking ahead to April 2028
The Budget also confirmed further details of the previously announced High Value Council Tax Surcharge, which is due to take effect in England from April 2028.
The surcharge will apply to owners of residential properties valued at £2 million or more, based on 2026 property values.
Standard annual charges will initially range from £2,500 to £7,500, depending on the property’s value, and will be payable in addition to ordinary Council Tax. Charges will increase in line with CPI inflation from 2029/30. A 100% premium has also been announced for properties left substantially unfurnished and unoccupied for at least 12 months, so some charges could exceed £7,500.
Certain exemptions, discounts and payment deferral arrangements will also be available.
For those owning higher-value homes, the additional annual cost may be worth factoring into longer-term expenditure and retirement planning.
What does this mean for you?
For higher earners, the greatest opportunities often come from considering your overall financial position rather than individual tax allowances in isolation.
In particular, it may be worth reviewing:
- Income and tax planning: how bonuses, dividends and other income affect your Personal Allowance and overall tax position;
- Pension contributions: your available Annual Allowance, employer contributions, eligible carry forward and the forthcoming salary sacrifice changes;
- Cash and investments: making use of ISA allowances and reviewing exposure to higher taxes on savings interest and rental income;
- Estate planning: reviewing pension beneficiaries, Inheritance Tax exposure and how wealth may eventually pass to family members; and
- Property costs: allowing for any additional charges on higher-value homes.
The key is to ensure that your income, investments, pensions and estate plans continue to work together, particularly as previously announced tax changes come into effect over the coming years.
Thank you,
The Citygate FP Team
Citygate Financial Planning Limited (trading as Citygate Financial Planning) is registered in England and Wales under company number 9188423, with its registered office at 80 Coleman Street, London, EC2R 5BJ. Citygate Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 647956).
