Savings tax 2027: what's changing and who pays more

What is changing to savings tax from April 2027?

From 6 April 2027, the tax you pay on savings interest is rising. HM Treasury set out the change in guidance published with the Autumn Budget on 26 November 2025: tax on savings income increases by 2 percentage points across every band, on the same day the Cash ISA limit drops to £12,000 for most savers.

This is separate from the ISA rules. It affects interest earned outside an ISA only, from ordinary bank and building society accounts. Interest earned inside an ISA, of any kind, stays completely tax-free, both before and after the change.

Nothing changes about how you report or pay the tax: for most people with interest above their allowances, HMRC still collects it automatically, usually through a tax code adjustment or a bill sent after the tax year ends.

What are the new savings tax rates for 2027/28?

The increase applies across all three bands, each rising 2 percentage points.

Tax on savings interest, before and after 6 April 2027

Basic rate

20% to 22%

On interest above your allowances

Higher rate

40% to 42%

On interest above your allowances

Additional rate

45% to 47%

On interest above your allowances

Interest inside an ISA

0%

Unchanged, at every band

These rates apply only to interest above your tax-free allowances. The government says it is making no changes to the tax rates on employment and self-employment income. Only income from savings, dividends and property is affected.

Is the Personal Savings Allowance changing?

No. The Personal Savings Allowance and the starting rate for savings are staying exactly as they are.

Most taxpayers can still earn some interest tax-free before any of this applies:

• Basic rate taxpayers: £1,000 of interest a year, tax-free.
• Higher rate taxpayers: £500 of interest a year, tax-free.
• Additional rate taxpayers: no Personal Savings Allowance.

On top of that, if your other taxable income (not counting savings interest or dividends) is below £17,570, you also get the starting rate for savings: up to £5,000 of interest taxed at 0%. Every £1 of other income above your £12,570 Personal Allowance reduces this by £1, so it tapers away as your income rises. None of these figures change under the 2027 reform.

Who is not affected by the change?

Most UK taxpayers. Over 90% of UK taxpayers do not pay any tax on their savings interest at all, according to the government’s own figures, mainly because their interest stays within the Personal Savings Allowance, the starting rate for savings, or an ISA.

You are unaffected if:

• You do not pay Income Tax at all, because your total income is below your Personal Allowance.
• Your savings interest, added to any other non-ISA income, stays within your Personal Savings Allowance and starting rate for savings.
• All your savings sit inside an ISA, where interest is always tax-free regardless of the rate.

Pensioners are treated no differently to anyone else. Whether you pay more tax on your savings interest depends on how much taxable interest you have outside an ISA and above your allowances, not on your age. The majority of pensioners have no taxable savings interest and will pay no more tax because of this change.

Does this apply if you pay Scottish income tax?

Yes, in full, and at the same rates as the rest of the UK. Scottish Income Tax has its own bands for wages, pensions and most other income, but gov.uk confirms that savings interest and dividends are treated differently: Scottish taxpayers pay tax on both at the same UK-wide rates as everyone else, not at the separate Scottish rates that apply to their wages and pension income.

That means a Scottish basic rate taxpayer with taxable savings interest faces the same 22% rate as a basic rate taxpayer anywhere else in the UK from 6 April 2027, even where their rate on wages and pension income is different. Scottish taxpayers are not taxed on savings interest using the Scottish starter, basic, intermediate, higher, advanced or top rate bands.

How does this interact with the new £12,000 Cash ISA limit?

The same day, 6 April 2027, also brings the reduced £12,000 Cash ISA limit for anyone 64 or under at the end of the tax year. Savers 65 and over keep the full £20,000 Cash ISA limit. The overall £20,000 ISA allowance is not changing.

Put the two changes together and the direction is clear: less room to hold cash inside a Cash ISA, and a higher tax rate on the interest you earn outside one. Interest inside an ISA, cash or otherwise, is unaffected by either change and stays completely tax-free.

For anyone saving more than the new £12,000 Cash ISA limit each year, more of what sits in ordinary savings accounts is likely to become taxable from 2027/28 than before, simply because there is less ISA shelter available and a higher rate applies to what sits outside it.

Two worked examples

These examples use an assumed savings interest rate of 4% for illustration only. Real rates vary by account and change over time.

A basic rate taxpayer holds £30,000 in an ordinary savings account, outside an ISA, earning 4% interest: £1,200 for the year. Their £1,000 Personal Savings Allowance leaves £200 taxable.

• In 2026/27, at 20%: £40 tax.
• From 2027/28, at 22%: £44 tax.
• The change costs this saver £4 more, on the same £200 of taxable interest.

A higher rate taxpayer holds the same £30,000 at the same 4%, so £1,200 interest. Their smaller £500 Personal Savings Allowance leaves £700 taxable.

• In 2026/27, at 40%: £280 tax.
• From 2027/28, at 42%: £294 tax.
• The change costs this saver £14 more, on the same £700 of taxable interest.

Both examples assume the whole balance sits outside an ISA. Moving some or all of it into a Cash ISA, up to whatever allowance applies, removes tax on that portion of the interest entirely, at either rate, before or after April 2027. Our ISA versus savings account calculator can help you compare the two using your own numbers.

What are your options before 6 April 2027?

These are options to weigh up, not a recommendation about what to do with your own money.

• Use this year’s allowance. Until 5 April 2027, the full £20,000 ISA allowance can still go into cash if you want it to. From 6 April 2027, only £12,000 of it can for most savers. See our guide on filling your Cash ISA before April 2027.
• Check a spouse or partner’s allowance too. Each adult has their own £20,000 ISA allowance and their own Personal Savings Allowance, so a couple’s combined tax-free headroom is larger than either person’s alone.
• Check your own headroom first. Work out whether your non-ISA interest is actually likely to exceed your Personal Savings Allowance and starting rate for savings before assuming the change affects you at all.
• Weigh up fixed against easy access. The top easy access Cash ISA in our table currently pays 4.50% AER (Chip, checked 29 September 2026), and the top one-year fix pays 4.88% AER (Hodge Bank, checked 29 September 2026). See fixed or easy access ISA for how to think about that trade-off, and our full Cash ISA tables for current rates.
• Consider a pension as well as a Cash ISA. A pension shelters money differently, through tax relief rather than tax-free interest. See ISA versus pension for how the two compare.