UK proposes 24% rate for qualifying yearly-interest deductions

Finance Act 2026 already changes section 874(2) of the Income Tax Act 2007 so deductions use the savings basic rate for 2027–28 onwards. That amendment is not yet the rate rule for current-year payments. Section 6(8) supplies the future-year application, while Schedule 1 paragraph 29 makes the substitution.^[2][4][5]

Section 5 of Finance Act 2026 currently sets the savings basic rate for 2027–28 at 22%. The new proposal would raise it to 24% through Finance Bill 2026–27. The proposed 24% should not be described as enacted or used automatically for payments before its proposed start date.^[1][3]

Section 874 concerns yearly interest arising in the UK and specified payer or overseas-recipient circumstances. Domestic exceptions remain important. Sections 930 and 933 provide a qualified exception where the payer reasonably believes the beneficially entitled recipient is a UK-resident company; directions and trustee or agent restrictions also matter.^[2][6][7]

Groups should establish payment date, UK source, yearly-interest classification, payer category and beneficial entitlement before assessing deductions. Relevant statutory exceptions and any claimed treaty relief need separate verification. Neither a UK connection nor an interest payment alone establishes a 24% liability.^[1][2][6][7]