Answers · UK 2025/26

Are savings interest taxable in the UK?

Yes, savings interest is taxable income, but the Personal Savings Allowance shields the first £1,000 (basic-rate), £500 (higher-rate) or £0 (additional-rate) per tax year. ISA interest and Premium Bond wins are exempt. Banks pay interest gross — HMRC reconciles via your tax code.

Last updated: 16 May 2026Last reviewed: 16 May 2026How we verify

Full answer

Interest from current accounts, savings accounts, fixed-rate bonds, credit-union deposits, peer-to-peer lending and corporate bonds is taxable as savings income. The 2025/26 Personal Savings Allowance (PSA) gives £1,000 tax-free for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate. Below the PSA you owe nothing; above, interest is added to other income and taxed at your marginal rate. Worked example: basic-rate earner gets £1,500 of interest. £1,000 covered by PSA, £500 taxed at 20% = £100. Higher-rate earner same £1,500: £500 covered, £1,000 × 40% = £400. The starting rate for savings adds a further £5,000 of 0%-taxed interest for people with non-savings income below £17,570 — perfect for pensioners with modest income. ISA interest is always tax free and ignored by the PSA. Premium Bond wins are tax free. Joint accounts are split 50/50 by default for tax purposes. Banks send HMRC interest data each year via the Single Customer Account feed; HMRC adjusts tax codes mid-year (e.g. code drops from 1257L to 1207L) to collect tax on interest above the PSA, avoiding Self Assessment for most savers. Disagree? Update via your Personal Tax Account.