Personal Savings Allowance 2026/27: how much interest is tax-free

How much is the Personal Savings Allowance?

The Personal Savings Allowance is £1,000 a year for a basic rate taxpayer, £500 for a higher rate taxpayer and £0 for an additional rate taxpayer. It is the amount of savings interest you can earn in a tax year, from 6 April to 5 April, without paying Income Tax on it.

Tax-free savings interest in 2026/27

Personal Savings Allowance, basic rate

£1,000

A year, per person, on interest outside an ISA

Personal Savings Allowance, higher rate

£500

Additional rate taxpayers get £0

Starting rate for savings

Up to £5,000

If your other taxable income is under £17,570

Personal Allowance

£12,570

Covers savings interest if your other income has not used it up

gov.uk says most people can earn some interest from their savings without paying tax on it. Whether you pay depends on how much interest you earn, your other taxable income and your tax-free allowances. The Personal Savings Allowance is one of three allowances gov.uk lists for savings interest, alongside your Personal Allowance and the starting rate for savings, both covered below.

The allowance is per person, not per account. HMRC adds together the interest from all your savings accounts, so one allowance covers the total.

Your allowance depends on your Income Tax band:

Your band is set by your income including the interest, which the next section explains. gov.uk says Scottish taxpayers pay the same tax as the rest of the UK on dividends and savings interest. The Personal Allowance of £12,570 falls by £1 for every £2 of income over £100,000, and these thresholds are frozen until 5 April 2031.

If your interest is more than your allowance, you usually pay Income Tax on the amount above it, at your usual 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. gov.uk’s example is a basic rate taxpayer with £1,300 of interest: the first £1,000 is not taxed, and the other £300 is taxed at 20%, which is £60.

Does your interest count towards your tax band?

Yes. gov.uk says to work out your tax band you add all the interest you have earned to your other income. So the interest itself can move you into a higher band, and a higher band means a smaller allowance.

• Interest that takes your total income over £50,270 puts you in the higher rate band, so the allowance halves from £1,000 to £500.
• Interest that takes your total income over £125,140 puts you in the additional rate band, so the allowance falls to £0.

The savings tax calculator works out your band and allowances from your other income and your interest.

What is the starting rate for savings?

If your other taxable income, not counting savings interest or dividends, is less than £17,570, you can earn up to £5,000 of interest tax-free through the starting rate for savings. Every £1 of other income above your Personal Allowance reduces it by £1. You can get it as well as the Personal Savings Allowance.

Your Personal Allowance can cover savings interest too. If your wages, pension or other income do not use all of it, HMRC applies the rest to your savings interest.

gov.uk gives this example. Someone earns £16,000 of wages and £200 of savings interest. The first £12,570 of the wages uses up the £12,570 Personal Allowance. The remaining £3,430 of wages reduces the starting rate for savings by £3,430, which leaves £1,570 of the £5,000. The £200 of interest fits inside that, so no tax is due on it.

Add the three allowances together and someone with no other income could have £18,570 of interest tax-free: the £12,570 Personal Allowance, the £5,000 starting rate for savings and the £1,000 Personal Savings Allowance for a basic rate taxpayer. That is simply the three added up, and it shrinks as other income rises.

How much savings does it take to use up the allowance?

It depends on the rate your savings earn, because the allowance limits interest, not savings. At an illustrative 4% a year, £25,000 of savings outside an ISA earns £1,000, which is the whole of a basic rate taxpayer’s allowance.

An illustration. The table divides each allowance by an illustrative rate and rounds to the nearest £100. AER is the annual equivalent rate, and the table assumes the balance stays the same all year. The rates are examples, not forecasts and not the rate on any account.

It is the total interest across every account that counts, so the balance can be split between as many accounts as you like. An additional rate taxpayer’s allowance is £0, so there is no balance to show for that band. The table assumes the balance stays the same all year, so it does not suit a regular saver, which builds its balance month by month: see regular saver vs Cash ISA.

These figures cover the Personal Savings Allowance only. Your Personal Allowance and the starting rate for savings can cover more interest on top, depending on your other income.

When does interest count towards your allowance?

HMRC’s Savings and Investment Manual says interest arises when you receive it or when it is made available to you. It is made available if it is credited to an account you are free to draw on.

That makes a difference for a fixed term bond:

• If the bond credits interest each year and lets you get at your money, even with a penalty, the interest is taxed each year as it is credited.
• If the terms allow no access at all until maturity, the interest arises, and is taxed, at maturity.

The practical point is that a bond that pays all its interest at the end can put several years of interest into one tax year. That can take you over your allowance in that year, even if you would have stayed within it had the interest arrived a year at a time. The terms of a bond say how its interest is credited and whether you can get at the money early.

Does ISA interest count towards the 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. So interest in an ISA uses none of your allowance, and gov.uk says you do not usually pay tax on it either. Money in an ISA also leaves the allowance free for interest on savings outside one.

See do you pay tax on ISA interest for the full rules. To compare an ISA with a taxable account at rates you choose, use the ISA vs savings account calculator.

How is tax on savings interest collected?

After 5 April each year, your bank or building society tells HMRC how much interest it paid you. What happens next depends on how much interest you earned.

If your interest is £10,000 or less:

• If you already file a Self Assessment tax return, you report the interest there.
• If you are employed or get a pension and have tax to pay, HMRC sends you a tax calculation, usually between June and the following March. It usually collects the tax through your tax code, which may also include an estimate of the current year’s interest.
• If you have no tax code, HMRC may send you a Simple Assessment letter.
• If you have tax to pay and get no letter by 31 March of the following tax year, contact HMRC.

If your interest is more than £10,000: you tell HMRC on a Self Assessment tax return. You need to register for Self Assessment if you do not already file.

Refunds. If your total income was below your Personal Allowance, you can claim back tax paid on savings interest. You have 4 years from the end of the tax year to claim, through Self Assessment, by contacting HMRC or on form R40.

What about joint accounts and children’s savings?

Joint accounts. HMRC splits the interest on a joint account equally between the account holders. Each person’s share counts towards their own allowance, and you can contact HMRC if the interest should be split differently.

Children’s savings. gov.uk says there is usually no tax to pay on children’s accounts. The exception is money given by a parent. gov.uk says to tell HMRC if, in the tax year, the child gets more than £100 in interest from money given by a parent, and that the parent pays tax on all the interest if it is above the parent’s own Personal Savings Allowance. The £100 limit does not apply to money given by grandparents, relatives or friends, or to money in a Junior ISA or Child Trust Fund. See Junior ISAs.

What changes from 6 April 2027?

The tax rates on savings interest rise by 4 percentage points in every band, 2 announced in 2025 and a further 2 in the Budget on 28 October 2026. From 6 April 2027 they are 24% for a basic rate taxpayer, 44% for a higher rate taxpayer and 49% for an additional rate taxpayer, up from 20%, 40% and 45% in 2026/27. The 2025 gov.uk factsheet on the change describes the Personal Savings Allowance at £1,000 and £500 and the starting rate for savings at £5,000. The change is to the rates, not those amounts.

The Cash ISA limit stays £20,000, after the Budget cancelled a planned cut to £12,000, so you keep the same room to shelter cash in a Cash ISA, where this allowance does not apply. See the Cash ISA limit.

Savings tax 2027 explains the rate change, and the savings tax calculator works out the tax on your own interest in 2026/27 and from 2027/28.