Tax on Savings Interest Calculator
Basic-rate taxpayers get £1,000 of interest tax-free, higher-rate £500, additional-rate nothing. Low earners can also use the £5,000 starting rate for savings.
Updated 2026-10-03 · 2026/27 HMRC rates
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Key facts
- The personal allowance stays at £12,570 in 2026/27 and is reduced by £1 for every £2 of adjusted net income over £100,000, so it is gone entirely at £125,140 (HMRC income tax rates and allowances).
- In England, Wales and Northern Ireland, 2026/27 income tax is 20% on the first £37,700 of taxable income, 40% up to £125,140 and 45% above that (HMRC rates and thresholds for employers 2026 to 2027).
- Scotland has six bands in 2026/27: 19% starter on the first £3,967 of taxable income, 20% basic to £16,956, 21% intermediate to £31,092, 42% higher to £62,430, 45% advanced to £125,140 and 48% top above that (HMRC rates and thresholds for employers 2026 to 2027).
- Budget 2025 extended the freeze on income tax thresholds and the equivalent employee and self-employed National Insurance thresholds for a further three years, from April 2028 to April 2031 (HM Treasury Budget 2025).
- Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year and 2% above that in 2026/27 (HMRC rates and thresholds for employers 2026 to 2027).
- Employers pay 15% National Insurance on earnings above the £5,000 secondary threshold, and eligible employers can claim an Employment Allowance of £10,500 (HMRC rates and thresholds for employers 2026 to 2027).
- Self-employed people pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that; voluntary Class 2 costs £3.65 a week if profits are below £7,105 (GOV.UK self-employed National Insurance rates).
- Dividend tax rose by 2 percentage points from April 2026: the basic rate is now 10.75% and the higher rate 35.75%, while the additional rate stays at 39.35% and the dividend allowance stays at £500 (GOV.UK tax on dividends).
Related
The three allowances that protect savings interest
Interest is tax-free when it is covered by one of three allowances, applied in order. First, any Personal Allowance not used by wages or pension. Second, the £5,000 starting rate for savings, available if your other taxable income is under £17,570 and reduced £1 for every £1 of other income above £12,570. Third, the Personal Savings Allowance of £1,000 for basic-rate taxpayers or £500 for higher-rate.
To work out your tax band for the Personal Savings Allowance, add your interest to your other income. Interest can push you into the higher rate band, halving your allowance.
Worked examples
Salary £25,000 and £1,500 interest: the £1,000 allowance covers most of it, and £500 is taxed at 20%, £100.
Salary £55,000 and £1,500 interest: as a higher-rate taxpayer the allowance is £500, leaving £1,000 at 40%, £400.
Pension income of £14,000 and £3,000 interest: £1,430 of income above the Personal Allowance reduces the starting rate band to £3,570, which covers all the interest. Tax due: £0.
Income of £130,000 and £800 interest: additional-rate taxpayers get no allowance, so all of it is taxed at 45%, £360.
How much savings before tax is due?
The answer depends on your interest rate as much as your balance. The table shows roughly how large a balance a basic-rate taxpayer could hold before the interest exceeds the Personal Savings Allowance.
| Interest rate | Balance that earns £1,000 a year | Higher-rate equivalent (£500) |
|---|---|---|
| 3.0% | £33,333 | £16,667 |
| 4.0% | £25,000 | £12,500 |
| 5.0% | £20,000 | £10,000 |
How HMRC collects tax on interest
Banks pay interest without deducting tax and report it to HMRC after 5 April each year. If tax is due, HMRC sends you a tax calculation or changes your tax code. Self Assessment filers include interest on their return instead.
Interest on joint accounts is split equally between the holders unless you tell HMRC otherwise.
Changes coming in 2027
Budget 2025 announced that savings income tax rates will rise by 2 percentage points in every band from April 2027. From 6 April 2027 the cash ISA limit will be £12,000 within the overall £20,000 ISA allowance for savers under 65; over-65s keep the full £20,000 cash limit.
Who benefits from the starting rate for savings
The starting rate mainly helps people with low earnings, such as retirees living on a small pension or people working part-time. Every £1 of non-savings income above the Personal Allowance reduces the £5,000 band by £1, so it disappears completely at £17,570.
| Other income | Starting rate band left | Tax-free interest (with £1,000 PSA) |
|---|---|---|
| £12,570 | £5,000 | £6,000 |
| £14,000 | £3,570 | £4,570 |
| £16,000 | £1,570 | £2,570 |
| £17,570 | £0 | £1,000 |
Ways to reduce tax on savings
- Move cash into a cash ISA – interest inside an ISA is tax-free and does not count towards any allowance.
- Married couples and civil partners can hold savings in the name of the partner with the lower tax rate to use their allowance.
- Personal pension contributions extend your basic rate band and can bring you back under the higher rate threshold, restoring the full £1,000 allowance.
- Premium Bonds and some National Savings products pay tax-free returns.
Frequently asked questions
Is ISA interest taxed?
No. Interest inside an ISA is tax-free and does not use your Personal Savings Allowance.
Do I pay tax on Premium Bond prizes?
No. Premium Bond prizes are tax-free and do not use your Personal Savings Allowance.
How do I pay tax on savings interest if I am employed?
HMRC usually adjusts your tax code or sends a calculation after the end of the tax year. You do not normally need to register for Self Assessment just for interest, unless it is more than £10,000 – then you must report it on a Self Assessment return.
Does interest count towards the £100,000 Personal Allowance taper?
Yes. Savings interest is part of adjusted net income, so it can reduce your Personal Allowance once income passes £100,000.
How much can I save in an ISA in 2026/27?
Up to £20,000 across all your ISAs in the 2026/27 tax year.
Is interest on a joint account split for tax?
HMRC splits it equally between the account holders unless you tell it the money belongs to you in different shares.
Does the starting rate for savings apply to dividends?
No. The starting rate for savings only covers savings interest. Dividends have their own dividend allowance.
What happens if my interest goes over the Personal Savings Allowance?
Only the interest above the allowance is taxed, at your usual rate: 20% for basic-rate, 40% for higher-rate and 45% for additional-rate taxpayers.
Sources
Figures are taken from official government publications and were last reviewed on 2026-10-03.
- HMRC: Rates and thresholds for employers 2026 to 2027
- GOV.UK: Tax on dividends
- HM Treasury: Budget 2025
- HMRC: Income Tax rates and allowances for current and past years
- GOV.UK: Tax on savings interest – how much is tax free
- GOV.UK: Self-employed National Insurance rates
- HMRC: Capital Gains Tax rates and annual tax-free allowances
- GOV.UK: Business Asset Disposal Relief
- HMRC: Pension schemes rates and allowances
- HMRC: Work out your tapered annual allowance
- GOV.UK: Workplace pensions – what you, your employer and the government pay
- The Pensions Regulator: Work out who to put into a pension
- HMRC: Corporation Tax rates and allowances
- HMRC: Tax credits, Child Benefit and Guardian’s Allowance rates
- GOV.UK: High Income Child Benefit Charge
- GOV.UK: Marriage Allowance
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Tax-Free Childcare
- GOV.UK: VAT rates
- GOV.UK: VAT registration – when to register
- GOV.UK: Tax on savings interest
- GOV.UK: Individual Savings Accounts (ISAs)