Do you pay tax on ISA interest?

Is ISA interest taxable?

No. gov.uk says you do not pay tax on interest on cash in an ISA, or on income or capital gains from investments in an ISA. You keep your savings on a tax-free basis for as long as the money stays in your ISA accounts.

You can take money out of an ISA at any time without losing the tax benefits on what it earned, but the money is then outside the ISA. Interest it earns elsewhere can be taxable: see the section on interest outside an ISA below. gov.uk says to check the terms of your ISA for any rules or charges on withdrawals.

Tax on ISA interest, at a glance

Tax on interest, income and gains inside an ISA

None

Declared on a tax return

No

If you complete a tax return

ISA interest and the Personal Savings Allowance

Not used

The allowance does not apply to interest paid in an ISA

Planned 22% charge on cash in investment ISAs

Unconfirmed

Never applied to Cash ISAs

Do you declare an ISA on a tax return?

No. gov.uk says that if you complete a tax return, you do not need to declare any ISA interest, income or capital gains on it. HMRC’s guidance for ISA managers says the same, with one exception: you do have to declare them if an ISA subscription has been made void.

HMRC’s guidance says subscriptions can be treated as invalid, for example where an investor tells their provider that they have become non-resident. Where someone pays in more than the overall allowance in a tax year, it says the excess and any related gains can be removed to correct the error. See how to open an ISA for who can pay in.

Does ISA interest use your Personal Savings Allowance?

No. HMRC’s factsheet on the 2027 ISA changes says the Personal Savings Allowance does not apply to any growth or interest paid in an ISA. That means ISA interest does not use any of the allowance, which stays available for interest on savings outside an ISA. gov.uk sets the allowance at £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and £0 for an additional rate taxpayer.

Because it is not taxed, ISA interest is also outside your taxable income, so it does not count towards your adjusted net income or the thresholds based on it. See does ISA interest count as income.

What about interest outside an ISA?

Interest on savings outside an ISA can be taxed, but only above your allowances. gov.uk lists three: your Personal Allowance, if your other income has not used it up, the starting rate for savings, and the Personal Savings Allowance. The starting rate for savings covers up to £5,000 of interest. It shrinks as your other income rises above your Personal Allowance and is gone once your other taxable income reaches £17,570. Your tax band depends on your other income plus the interest.

Interest above your allowances is taxed at your usual Income Tax rate. In 2026/27 that is 20% for a basic rate taxpayer, 40% for a higher rate taxpayer and 45% for an additional rate taxpayer.

An illustration. This is not a forecast and is not tied to any account or person. It takes £1,500 of interest earned in 2026/27 by a saver whose tax band is set by their other income, and who has no Personal Allowance or starting rate for savings left to cover it. The Personal Savings Allowance covers the first part of the interest, and the rest is taxed at the band’s rate.

The tax is charged on the interest above the allowance: £500 at 20%, £1,000 at 40% and £1,500 at 45%. An ISA only saves tax on interest that would otherwise be taxed, so where your interest stays within your allowances it saves nothing.

From 6 April 2027 the rates on savings interest outside an ISA rise by 4 percentage points in total, according to the Budget documents of 28 October 2026. That makes them 24% for a basic rate taxpayer, 44% for a higher rate taxpayer and 49% for an additional rate taxpayer. On the same £1,500, with the same allowances, the tax would be £120, £440 and £735. See savings tax 2027 and the savings tax calculator. Tax treatment depends on your circumstances and may change.

What changes in April 2027?

Interest inside a Cash ISA stays tax-free, and the Budget on 28 October 2026 cancelled the planned cut of the Cash ISA limit to £12,000, so the limit stays £20,000. See the Cash ISA limit.

HMRC had planned a flat-rate charge, from 6 April 2027, on any interest or alternative finance return paid on cash held inside a Stocks and Shares or Innovative Finance ISA, set at the savings basic rate then of 22%. The Budget documents do not mention it, and press reports say it is not going ahead as planned, so it is unconfirmed. It would not have applied inside Cash ISAs. These ISAs hold investments, and with investments your capital is at risk.

For the full picture, read Will Cash ISAs be taxed from 2027?

What if you move abroad or die?

If you move abroad. gov.uk says you can keep your ISA open and you will still get UK tax relief on the money and investments in it. You cannot pay in once you are a non-UK resident, unless you are a Crown employee working overseas or their spouse or civil partner. You must tell your provider as soon as you stop being a UK resident. See what happens to your ISA if you move abroad.

If you die. gov.uk says there is no Income Tax or Capital Gains Tax to pay until the ISA ends, but ISA investments form part of your estate for Inheritance Tax. The ISA ends when your executor closes it or the estate is settled, or your provider closes it 3 years and 1 day after you die. See what happens to an ISA when you die.