- Changes to the personal allowance system, announced in the last Labour Budget, will lead to an extra charge for some taxpayers from April 2027.
- The new rules will primarily affect individuals with additional income from investments, property, or savings, pushing more of this income into higher tax bands.
- Currently, HMRC allows taxpayers to allocate their personal allowance in the most tax-efficient way, often against savings or dividend income.
- From 2027, the personal allowance must first be allocated against employment, trading, or pension income, potentially increasing tax bills by up to £182 or more for those affected.
- Experts warn this change could disincentivise saving and lead to rent increases, while the Treasury states it aims to tax income from assets more fairly.
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