Do I pay tax on savings interest in the UK in 2026?

Full answer

For 2026/27, savings interest is potentially taxable, but generous allowances mean most people pay nothing. The Personal Savings Allowance (PSA) gives basic-rate taxpayers £1,000 of tax-free interest, higher-rate taxpayers £500, and additional-rate taxpayers £0. On top of that, low earners can use the £5,000 starting rate for savings, which tapers away as non-savings income rises above £12,570. ISAs are entirely tax-free and sit outside all this. Worked example: a basic-rate taxpayer with £30,000 of savings earning 4% gets £1,200 interest; the first £1,000 is covered by the PSA, and the remaining £200 is taxed at 20% = £40. A higher-rate taxpayer with the same £1,200 interest has only a £500 allowance, so £700 is taxed at 40% = £280. Banks report interest to HMRC, which usually collects any tax due by adjusting your tax code rather than requiring a tax return for small amounts. With higher interest rates in recent years, more savers are breaching the PSA, so moving money into a Cash ISA (£20,000 annual allowance) shields it completely. The PSA is UK-wide, though Scottish rates apply to taxable interest. Use the Savings calculator to estimate your interest and any tax due.

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More answers

• Do I pay tax on savings interest in the UK?
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