Section 6 | New rates of income tax on property income

(1)Part 1 of ITA 2007 (rates at which income tax is charged etc) is amended as follows.

(2)After section 6C insert—

6DThe property basic, higher and additional rates

(3)After section 11C insert—

11CAIncome charged at the property basic, higher and additional rates: individuals

(1)Income tax is charged at the property basic rate on an individual’s income which—

(a)is property income, and

(b)would otherwise be charged at the basic rate or the default basic rate.

(2)Income tax is charged at the property higher rate on an individual’s income which—

(a)is property income, and

(b)would otherwise be charged at the higher rate or the default higher rate.

(3)Income tax is charged at the property additional rate on an individual’s income which—

(a)is property income, and

(b)would otherwise be charged at the additional rate or the default additional rate.

(4)Subsections (1) to (3) are subject to—

section 11A (income charged at Scottish rates),

section 11CB (income charged at the Welsh property basic, higher and additional rates: individuals),

any other provisions of the Income Tax Acts which provide for income to be charged at different rates of income tax in some circumstances.

(5)Sections 16 and 16A have effect for determining the extent to which an individual’s property income would otherwise be charged at the basic, higher or additional rate or the default basic, default higher or default additional rate.

(4)After section 16 insert—

16ATreatment of property income in hierarchy of total income

(1)This section has effect for determining—

(a)which part of a Scottish taxpayer’s income consists of property income,

(b)the rate at which income tax would be charged on a person’s property income apart from section 11CA, and

(c)the rate at which income tax would be charged on the property income of a Welsh taxpayer apart from section 11CB.

(2)It also has effect for all other income tax purposes except for the purposes of sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief).

(3)If a person has property income but no dividend income or savings income, the property income is treated as the highest part of the person’s total income.

(4)If a person—

(a)has property income, and

(b)dividend income or savings income (or both dividend income and savings income),

the property income is treated as the part of the person’s total income immediately before the savings income or, if the person does not have savings income, immediately before the dividend income.

(5)After section 17 insert—

17AMeaning of “property income”

(1)This section applies for the purposes of the Income Tax Acts.

(2)“Property income” is income which is—

(a)chargeable under Chapter 3 of Part 3 of ITTOIA 2005 (the profits of a UK property business or an overseas property business),

(b)chargeable under Chapter 7 of that Part (amounts treated as adjustment income under section 330),

(c)chargeable under Chapter 8 of that Part (rent receivable in connection with a UK section 12(4) concern),

(d)chargeable under Chapter 9 of that Part (rent receivable for UK electric-line wayleaves), and

(e)chargeable under Chapter 10 of that Part (post-cessation receipts arising from a UK property business).

(6)In section 25 (reliefs and allowances deductible at Steps 2 and 3: supplementary), after subsection (3) insert—

(3A)Subsection (2) is also subject to a requirement that the reliefs and allowances in Steps 2 and 3 must be deducted from components of income other than property income, savings income or dividend income (so far as it would otherwise be possible to do so) before they are deducted from property income, savings income or dividend income.

(7)Schedule 1 makes amendments in connection with, or otherwise related to, provision made by this section and section 5 (including amendments concerning savings rates).

(8)The amendments made by this section and that Schedule have effect for the tax year 2027-28 and subsequent tax years.