Answers · UK 2025/26
Do I pay tax on savings interest in the UK?
Most UK savers pay no tax on interest thanks to the Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate. Interest within ISAs is always tax-free. Above your allowance, interest is added to your income and taxed at your marginal rate.
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Personal Savings Allowance (PSA) 2025/26: basic-rate taxpayers (income up to £50,270) get £1,000 of interest tax-free; higher-rate taxpayers (£50,270–£125,140) get £500; additional-rate taxpayers above £125,140 get no PSA. Banks and building societies pay interest gross (no tax deducted at source) and report to HMRC. If your total interest exceeds your PSA, HMRC usually adjusts your tax code to collect the extra tax through PAYE. If you are self-assessed, declare it on the return. Starter Rate for savings: if your non-savings income is below £17,570 you may also benefit from the £5,000 Starter Rate at 0% — useful for retirees and part-time workers. Tax-free alternatives: Cash ISA (no limit on interest earned; annual allowance £20,000), Premium Bonds (prizes are tax-free, though not technically interest).
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.