Autumn Budget 2026 savings income tax explainer

analysis/uk-budget-2026-savings-income-tax/README.md

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+# Savings income tax: supporting analysis
+
+This directory records the calculation and source provenance for the savings income tax article. The article contains hypothetical household examples and the government's costing. It contains no PolicyEngine population estimates.
+
+## Household examples and chart
+
+The [shared analysis directory](../uk-budget-2026-income-tax/) contains the household inputs, model pins, October 2026 forecast, outputs and every-£2 chart validation. Its `generate_households.py` raises savings and property rates together against the already scheduled 2027–28 rules, using policyengine 6.11.1, UK 2.151.0 and core 3.33.3. The `saver_*` households have no property income, so only the savings rate change affects them. The mixed `property_then_savings_order` example reports the change in savings income tax alone; it does not report the combined reform's change in total income tax.
+
+The article's chart data, series and markers match `savings-interest-chart.json`. Its source label uses “hypothetical” consistently with the text. The chart and displayed household amounts have not been recalculated for the editorial update.
+
+## Government costing
+
+The primary source is the OBR's [October 2026 detailed policy table](https://obr.uk/download/october-2026-economic-and-fiscal-outlook-detailed-forecast-tables-zip-file/): `efo-october-2026-detailed-forecast-tables-policy.xlsx`, sheet `1.1`, measure 62, rows 304–306, SHA256 `cdcc2a06b100241bf3010bd159a4e5d43daef2348a3850797b1e88a308fd45fd`.
+
+For 2026–27 through 2031–32, its income tax line is 0, 63, 483, 443, 475 and 510, and its “Onshore CT” line is 13, 63, 74, 78, 80 and 81 (£ million). The independently rounded Budget Table 6.1 totals are 15, 125, 555, 520, 555 and 590. The article labels the lines separately and shows the Budget total for context.
+
+These official costings are separate from the household calculations. Neither the household outputs nor fixed-weight data sensitivities establish a corrected national savings estimate.
+
+## Cover
+
+`cover-provenance.json` records the original generated illustration, also retained under the property article's asset path. The savings copy has its own metadata/asset path and the same unchanged image checksum.

analysis/uk-budget-2026-savings-income-tax/cover-provenance.json

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+{
+  "tool": "built-in image_gen",
+  "original_path": "app/public/assets/posts/uk-autumn-budget-2026-property-income-tax/cover.webp",
+  "asset": {
+    "path": "app/public/assets/posts/uk-autumn-budget-2026-savings-income-tax/cover.webp",
+    "prompt": "Use case: stylized-concept.\nAsset type: original editorial cover illustration for PolicyEngine's UK Autumn Budget 2026 article on savings and property income tax.\nCreate a polished wide 16:9 landscape illustration, intended final size 1600x900. Match a coherent nonprofit policy research illustration series: deep dark teal background, soft subtle teal vignette, pale mint and turquoise objects, clean vector-like shapes rendered as a raster image, restrained dimensional depth, gentle shadows, crisp edges, professional calm neutral tone.\nScene: a simplified British terraced house and a savings coin stack arranged together beside a large white income-tax statement with a teal header and a few muted grey abstract lines. One mint coin bears a clear British pound symbol (£). House, savings and statement should read as one coherent still life about taxing rental income and savings interest.\nComposition: main objects within the central 65 percent of the canvas, clear at thumbnail size, generous breathing room on every edge, balanced wide layout, a subtle floor line. Avoid tiny details.\nText: only a single £ symbol on the coin; no words, no tax rates, no numbers, no labels, no title, no logos, no watermark.\nConstraints: original illustration, no people, no flags, no political symbolism, no arrows or data charts, no claims about gains or losses. The image should look like a refined flat editorial illustration with subtle depth, not a photograph or a glossy toy render.",
+    "width": 1672,
+    "height": 941,
+    "format": "WebP",
+    "encoding_quality": 85,
+    "pixels_resized": false,
+    "bytes": 59420,
+    "sha256": "fcaa9776fa6ebfab449034a0423a166f413a9b4a4d5041747ed4610b20e111b6",
+    "reuse_note": "Unchanged copy of the illustration also retained under the property article's asset path. The original illustration was generated for the combined savings/property draft; this reuse introduces no new generated image or data in the image."
+  }
+}

app/src/data/posts/articles/uk-autumn-budget-2026-savings-income-tax.md

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+The Autumn Budget 2026 announces a further two-percentage-point increase in the basic, higher and additional income tax rates on savings income from **6 April 2027**, taking them to **24%, 44% and 49%** across the UK. Interest earned inside an ISA remains exempt from income tax. The government plans to legislate for the new rates in Finance Bill 2026–27, as [Budget paragraph 6.247](https://assets.publishing.service.gov.uk/media/6ae1ec57bdb574cf1c9b3f12/E03668986_HMT_Budget_2026_ELAY__2_.pdf#page=142) sets out.
+
+Key figures:
+
+The household examples use 2027–28.
+
+- A basic-rate saver with £2,000 of annual interest outside ISAs pays £20 more a year.
+- A higher-rate saver with the same interest pays £30 more, because their Personal Savings Allowance is lower.
+- A basic-rate saver with £500 of interest pays no extra tax in the example below.
+- The government's costing, certified by the OBR, has £63 million of extra income tax in 2027–28, rising to £510 million in 2031–32. Its total in the Budget's Table 6.1, which adds the costing's “Onshore CT” (Corporation Tax) line, is £125 million in 2027–28 and £590 million in 2031–32.
+
+The income tax costing records revenue on a different timing basis from the tax-year household examples; see [the government's costing](#the-governments-costing).
+
+Our [Autumn Budget 2026 dashboard](https://www.policyengine.org/uk/autumn-budget-2026) is where we publish estimates for the Budget measures we model. Separate explainers cover the [property income tax increase](/uk/research/uk-autumn-budget-2026-property-income-tax) and the [trading allowance increase](/uk/research/uk-autumn-budget-2026-trading-allowance).
+
+## What changes in April 2027?
+
+The [Budget 2025 technical note](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note) had already set savings rates at 22%, 42% and 47% from April 2027. We measure the additional two-point increase against those existing 2027 rules. This measure leaves dividend rates unchanged.
+
+| Income tax band | Already scheduled for 2027–28 | Budget 2026 rate | Change |
+| --- | ---: | ---: | ---: |
+| Basic | 22% | 24% | +2 percentage points |
+| Higher | 42% | 44% | +2 percentage points |
+| Additional | 47% | 49% | +2 percentage points |
+
+## Household impacts
+
+The examples show the additional income tax on savings in 2027–28. They hold the stated income fixed and show tax on interest, before any changes in means-tested benefits.
+
+### Savers pay the new rates on interest above their allowances
+
+The Personal Savings Allowance remains £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. People with low other income can also qualify for a starting rate of 0% on up to £5,000 of savings interest. These allowances depend on total income, as [HMRC's savings guidance](https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-is-tax-free) explains. Interest earned inside an ISA remains exempt from income tax.
+
+These hypothetical adults live in England and receive only the wages and interest shown. Their wages use the Personal Allowance, and none qualifies for the starting rate for savings. The table isolates income tax on interest.
+
+| Annual employment income | Annual savings interest | Personal Savings Allowance | Interest taxed above 0% | Tax before the Budget change | Tax after | Extra annual tax |
+| --- | ---: | ---: | ---: | ---: | ---: | ---: |
+| £30,000 | £500 | £1,000 | £0 | £0 | £0 | £0 |
+| £30,000 | £2,000 | £1,000 | £1,000 | £220 | £240 | £20 |
+| £60,000 | £2,000 | £500 | £1,500 | £630 | £660 | £30 |
+
+For the basic-rate example, £2,000 − £1,000 = £1,000 faces the savings basic rate: £1,000 × 22% = £220 before, against £1,000 × 24% = £240 after. The higher-rate example pays an extra £1,500 × 2% = £30.
+
+The chart varies annual interest for the same two salaries. At these income levels, each additional £500 of interest above the allowance adds £10 to the tax increase.
+
+```chart
+{
+  "type": "line",
+  "title": "Savings tax increases apply above the Personal Savings Allowance",
+  "subtitle": "Annual income tax increase; England, salaries £30,000 and £60,000, 2027–28",
+  "xKey": "interest",
+  "xLabel": "Annual savings interest",
+  "yLabel": "Extra annual income tax",
+  "format": {
+    "prefix": "£",
+    "decimals": 0,
+    "separator": true
+  },
+  "xFormat": {
+    "prefix": "£",
+    "decimals": 0,
+    "separator": true
+  },
+  "source": "PolicyEngine 6.11.1 / UK 2.151.0; hypothetical adults, 2027–28; incomes held fixed.",
+  "series": [
+    {
+      "key": "basic",
+      "name": "£30,000 salary",
+      "color": "negative"
+    },
+    {
+      "key": "higher",
+      "name": "£60,000 salary",
+      "color": "secondary"
+    }
+  ],
+  "markers": [
+    {
+      "x": 500,
+      "label": "£60,000 salary: savings allowance"
+    },
+    {
+      "x": 1000,
+      "label": "£30,000 salary: savings allowance"
+    }
+  ],
+  "data": [
+    {
+      "interest": 500,
+      "basic": 0.0,
+      "higher": 0.0
+    },
+    {
+      "interest": 600,
+      "basic": 0.0,
+      "higher": 2.0
+    },
+    {
+      "interest": 700,
+      "basic": 0.0,
+      "higher": 4.0
+    },
+    {
+      "interest": 800,
+      "basic": 0.0,
+      "higher": 6.0
+    },
+    {
+      "interest": 900,
+      "basic": 0.0,
+      "higher": 8.0
+    },
+    {
+      "interest": 1000,
+      "basic": 0.0,
+      "higher": 10.0
+    },
+    {
+      "interest": 1100,
+      "basic": 2.0,
+      "higher": 12.0
+    },
+    {
+      "interest": 1200,
+      "basic": 4.0,
+      "higher": 14.0
+    },
+    {
+      "interest": 1300,
+      "basic": 6.0,
+      "higher": 16.0
+    },
+    {
+      "interest": 1400,
+      "basic": 8.0,
+      "higher": 18.0
+    },
+    {
+      "interest": 1500,
+      "basic": 10.0,
+      "higher": 20.0
+    },
+    {
+      "interest": 1600,
+      "basic": 12.0,
+      "higher": 22.0
+    },
+    {
+      "interest": 1700,
+      "basic": 14.0,
+      "higher": 24.0
+    },
+    {
+      "interest": 1800,
+      "basic": 16.0,
+      "higher": 26.0
+    },
+    {
+      "interest": 1900,
+      "basic": 18.0,
+      "higher": 28.0
+    },
+    {
+      "interest": 2000,
+      "basic": 20.0,
+      "higher": 30.0
+    },
+    {
+      "interest": 2100,
+      "basic": 22.0,
+      "higher": 32.0
+    },
+    {
+      "interest": 2200,
+      "basic": 24.0,
+      "higher": 34.0
+    },
+    {
+      "interest": 2300,
+      "basic": 26.0,
+      "higher": 36.0
+    },
+    {
+      "interest": 2400,
+      "basic": 28.0,
+      "higher": 38.0
+    },
+    {
+      "interest": 2500,
+      "basic": 30.0,
+      "higher": 40.0
+    },
+    {
+      "interest": 2600,
+      "basic": 32.0,
+      "higher": 42.0
+    },
+    {
+      "interest": 2700,
+      "basic": 34.0,
+      "higher": 44.0
+    },
+    {
+      "interest": 2800,
+      "basic": 36.0,
+      "higher": 46.0
+    },
+    {
+      "interest": 2900,
+      "basic": 38.0,
+      "higher": 48.0
+    },
+    {
+      "interest": 3000,
+      "basic": 40.0,
+      "higher": 50.0
+    },
+    {
+      "interest": 3100,
+      "basic": 42.0,
+      "higher": 52.0
+    },
+    {
+      "interest": 3200,
+      "basic": 44.0,
+      "higher": 54.0
+    },
+    {
+      "interest": 3300,
+      "basic": 46.0,
+      "higher": 56.0
+    },
+    {
+      "interest": 3400,
+      "basic": 48.0,
+      "higher": 58.0
+    },
+    {
+      "interest": 3500,
+      "basic": 50.0,
+      "higher": 60.0
+    },
+    {
+      "interest": 3600,
+      "basic": 52.0,
+      "higher": 62.0
+    },
+    {
+      "interest": 3700,
+      "basic": 54.0,
+      "higher": 64.0
+    },
+    {
+      "interest": 3800,
+      "basic": 56.0,
+      "higher": 66.0
+    },
+    {
+      "interest": 3900,
+      "basic": 58.0,
+      "higher": 68.0
+    },
+    {
+      "interest": 4000,
+      "basic": 60.0,
+      "higher": 70.0
+    },
+    {
+      "interest": 4100,
+      "basic": 62.0,
+      "higher": 72.0
+    },
+    {
+      "interest": 4200,
+      "basic": 64.0,
+      "higher": 74.0
+    },
+    {
+      "interest": 4300,
+      "basic": 66.0,
+      "higher": 76.0
+    },
+    {
+      "interest": 4400,
+      "basic": 68.0,
+      "higher": 78.0
+    },
+    {
+      "interest": 4500,
+      "basic": 70.0,
+      "higher": 80.0
+    },
+    {
+      "interest": 4600,
+      "basic": 72.0,
+      "higher": 82.0
+    },
+    {
+      "interest": 4700,
+      "basic": 74.0,
+      "higher": 84.0
+    },
+    {
+      "interest": 4800,
+      "basic": 76.0,
+      "higher": 86.0
+    },
+    {
+      "interest": 4900,
+      "basic": 78.0,
+      "higher": 88.0
+    },
+    {
+      "interest": 5000,
+      "basic": 80.0,
+      "higher": 90.0
+    }
+  ]
+}
+```
+
+### Other income affects the tax on interest
+
+From April 2027, employment, pension and trading income fill the tax bands first, property next, savings after that and dividends last. Allowances first reduce income other than property, savings or dividends.
+
+Consider an adult in England with £45,000 of salary, £6,000 of property profit after allowable expenses, £2,000 of interest and no mortgage interest. The £12,570 Personal Allowance leaves £32,430 of taxable salary. That uses £32,430 of the £37,700 basic-rate band, leaving £5,270. Property income fills the remaining basic-rate band and enters the higher band.
+
+The property income takes their total income to £53,000, which exceeds the £50,270 higher-rate threshold. Their Personal Savings Allowance is therefore £500. The remaining £1,500 of interest faces the higher savings rate: £1,500 × 42% = £630 before, against £1,500 × 44% = £660 after. Their tax on interest increases by **£30 a year**.
+
+## The government's costing
+
+The government's costing, certified by the OBR, appears in the OBR's [detailed policy table](https://obr.uk/download/october-2026-economic-and-fiscal-outlook-detailed-forecast-tables-zip-file/) (Table 1.1, measure 62). It has two lines, labelled “Income tax” and “Onshore CT”. The Budget's [Table 6.1, row 62](https://www.gov.uk/government/publications/supporting-documents-for-budget-2026) gives their total, rounded to the nearest £5 million and on a National Accounts basis; we show it for context.
+
+| Additional revenue, £ million | 2026–27 | 2027–28 | 2028–29 | 2029–30 | 2030–31 | 2031–32 |
+| --- | ---: | ---: | ---: | ---: | ---: | ---: |
+| OBR income tax line | 0 | 63 | 483 | 443 | 475 | 510 |
+| OBR “Onshore CT” line | 13 | 63 | 74 | 78 | 80 | 81 |
+| Table 6.1 total | 15 | 125 | 555 | 520 | 555 | 590 |
+
+The [Budget policy costings, page 75](https://assets.publishing.service.gov.uk/media/6ae1883fe4367e5c8b0467df/AB26_Policy_Costing.pdf#page=75) allow for savers moving funds into tax-advantaged products such as ISAs; the OBR puts that response at around £0.2 billion a year ([Economic and fiscal outlook, paragraph 3.17](https://obr.uk/efo/economic-and-fiscal-outlook-october-2026/)).
+
+The year tax is owed and the year it reaches the Exchequer can differ. Self Assessment payments on account normally rest on the previous year's tax bill; the balancing payment for 2027–28 is due on 31 January 2029, alongside the first payment on account for 2028–29. [HMRC's payment guidance](https://www.gov.uk/understand-self-assessment-bill/payments-on-account) explains that schedule. The [ONS public-finance methodology, section 6.1.2](https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/methodologies/monthlystatisticsonthepublicsectorfinancesamethodologicalguide) records Self Assessment income tax using cash receipts, without shifting them back to the year the income arose. This can produce a small first-year receipts effect followed by a catch-up.
+
+The OBR puts 2026–27's small yield on the “Onshore CT” line and shows no additional income tax before the new rates take effect. The independently rounded Table 6.1 total is £15 million for that year.
+
+## Assumptions and limitations
+
+- The worked examples are hypothetical single adults aged 35 in England. We hold their income fixed at the stated 2027–28 amounts. They include no pension contributions, Gift Aid, student loans, property losses, carried-forward finance costs or other reliefs. Their savings sit outside ISAs.
+- The household examples show income tax, holding behaviour fixed. They do not estimate household income after means-tested benefits or responses such as moving savings into ISAs.
+- The savings rate increase applies across the UK. The English examples do not establish the effect for a Scottish taxpayer with different tax on their other income.
+
+## Methodology
+
+The household calculations use the `policyengine` Python package (version 6.11.1), PolicyEngine UK (version 2.151.0) and PolicyEngine core (version 3.33.3), against the already scheduled 2027–28 rules. The shared generator raises savings and property rates together. The savers in the table and chart have no property income, so only the savings rate change affects them. In the mixed-income example, property income is taxed before savings, so the property rate change does not move interest between bands. We report the change in tax on interest alone.
+
+The baseline and reform calculations both use the OBR's October 2026 forecast update, as the dashboard does. Supplied 2027–28 income stays fixed; the forecast updates the model's projected parameters. We check tax calculations against independent arithmetic. The line chart plots the exact schedule breakpoints and points every £100, and its interpolation agrees with PolicyEngine UK to within one penny at every £2 of interest.
+
+The [shared analysis files](https://github.com/PolicyEngine/policyengine-app-v2/tree/main/analysis/uk-budget-2026-income-tax) record the household inputs, model versions, forecast settings and validation. We round monetary amounts in tables to whole pounds; the calculation records retain precision. The household calculations use hypothetical people and do not require population microdata.