UK Tax on Indian FD Interest and Rent: The 2027 Rates Explained

Yes. If you are resident in the UK, interest from Indian bank deposits (NRE, NRO and FCNR) and rent from property in India are normally taxable in the UK, even when India does not tax them. The Budget on 28 October 2026 raised the UK rates on savings and property income to 24%, 44% and 49% from 6 April 2027. Indian tax paid can usually be credited.

Key points

• From 6 April 2027, UK tax on savings income will be 24% (basic rate), 44% (higher rate) and 49% (additional rate), up from 20%, 40% and 45% today.
• Property income will be taxed at the same new rates in England, Wales and Northern Ireland.
• UK residents normally pay UK tax on foreign income, including savings interest and rent from overseas property.
• NRE interest is exempt from tax in India, but that exemption does not apply in the UK.
• Indian tax deducted can usually be claimed as Foreign Tax Credit Relief, but not always in full.
• New arrivals after 10 or more years abroad may be able to claim the 4-year foreign income and gains (FIG) regime.

What did the 28 October 2026 Budget change?

In his Budget speech, Chancellor John Healey announced that the rates of tax on income from property and savings will rise "by a further two percentage points from April 2027", with no change to tax on dividends or on employment income. The 2025 Budget had already set a 2-point rise for the same date, so the total increase from today's rates is 4 points.

The Budget rates annex sets out the figures:

Band	Savings and property income, 2026-27	Savings and property income, from 6 April 2027
Basic rate	20%	24%
Higher rate	40%	44%
Additional rate	45%	49%

The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland. The personal allowance stays at £12,570, and the personal savings allowance stays at £1,000 for basic-rate and £500 for higher-rate taxpayers. The Chancellor said 88% of people will pay no more tax on their savings.

One more change from the 2025 Budget takes effect at the same time. From April 2027, the personal allowance and other reliefs will be set against other income first, such as salary, and only then against property, savings and dividend income. For many people, that means more of their interest and rent falls into the new, higher rates.

Is Indian FD interest taxable in the UK?

For most UK residents, yes. GOV.UK explains that if you are UK resident you'll normally pay tax on your foreign income, and lists savings interest and rental income on overseas property among the examples. Interest on an Indian fixed deposit is foreign savings income, so the new savings rates will apply to it from 6 April 2027.

The type of Indian account matters for Indian tax, not for UK tax:

• NRE deposits: interest is exempt from income tax in India and the funds are fully repatriable, as Business Today explains. A UK resident still reports and pays UK tax on that interest.
• NRO deposits: banks deduct tax at source at 30% plus cess (and surcharge on large amounts). The interest is also taxable in the UK, usually with credit for the Indian tax.
• FCNR deposits: held in foreign currency. Like NRE interest, it is foreign savings income for a UK resident.

Many families assume NRE interest is tax-free everywhere because the Indian bank deducts nothing. That is the most common gap we see, and it grows with every year it is left unreported.

Is rent from a flat in India taxed in the UK?

Yes, for UK residents. Rent from property abroad is taxed as the profit of an overseas property business under Part 3 of the Income Tax (Trading and Other Income) Act 2005, as HMRC's guidance explains. That is property income, so the new property rates will apply from April 2027 for UK residents in England, Wales and Northern Ireland. The rent is usually also taxed in India, where the property is.

How do you avoid paying tax twice on the same income?

Where India has already taxed the income, you can usually claim Foreign Tax Credit Relief when you report it in your UK tax return. GOV.UK cautions that you may not get back the full amount: relief is limited by the India-UK double taxation agreement and by the UK tax due on that income. Keep the TDS certificates and bank statements from India so the credit can be supported.

NRE interest is the exception that catches people out. India charges no tax on it, so there is no Indian tax to credit, and the full UK rate applies.

Does the FIG regime help new arrivals in the UK?

It may. Since 6 April 2025, the foreign income and gains regime lets qualifying new residents claim relief on foreign income and gains for up to their first 4 years of UK residence, provided they were not UK resident for the previous 10 consecutive tax years. The relief must be claimed in the tax return for each year it is wanted. It does not suit everyone, so the claim deserves a calculation first.

What else changed in the Budget?

• The cash ISA limit stays at £20,000 a year, after a planned cut was dropped.
• A new Founders' Relief: a 10% capital gains tax rate on up to £10 million of lifetime gains for qualifying founders, from April 2027 according to the Budget rates annex.
• The Business Asset Disposal Relief limit falls from £1 million to £500,000.
• Capital gains tax rates stay at 18% and 24%, with a £3,000 annual exempt amount.

What should UK residents with money in India do now?

1. List every Indian deposit and property, with the interest or rent each produces in a year.
2. Check whether that income has been reported in past UK returns, NRE interest included.
3. If you arrived in the UK recently, check whether the 4-year FIG regime applies and whether claiming it makes sense.
4. Collect Indian TDS certificates and statements to support Foreign Tax Credit Relief.
5. Use ISA allowances for UK savings, and review where deposits are held before 6 April 2027 with advice in both countries.

The right answer depends on your residence history, your tax band in the UK, and how each asset is held in India. Outcomes depend on your facts.

This article is general information, not advice for your situation. Author: Team Greenwolf.