How much can a basic rate taxpayer earn from savings tax-free in 2026/27?

Full answer

In 2026/27, a basic rate taxpayer has up to three layers of tax-free savings income. 1. Personal Allowance (£12,570): Any savings income that falls within your unused Personal Allowance is tax-free. If your non-savings income already uses the full PA, this layer is unavailable. 2. Starting Rate Band for Savings (£5,000 at 0%): This applies only if your non-savings income (employment, self-employment, rental) is below £12,570 plus £5,000 = £17,570. The band tapers pound-for-pound once non-savings income exceeds the Personal Allowance. A person with only savings income and no other earnings could shelter up to £17,570 entirely tax-free. 3. Personal Savings Allowance (PSA): Basic rate taxpayers receive a £1,000 PSA. Higher rate taxpayers receive £500. Additional rate taxpayers receive £0. So a basic rate taxpayer whose non-savings income is at or below the Personal Allowance could shelter up to £6,000 of savings interest tax-free (£5,000 starting rate + £1,000 PSA), on top of the Personal Allowance itself. A higher rate taxpayer loses the starting rate band entirely (because their non-savings income exceeds £17,570) and has only a £500 PSA. Bank and building society interest is paid gross since 2016. HMRC will usually collect any tax due via PAYE coding or a Self Assessment return. You must complete a tax return if your savings income exceeds your allowances. For cash ISAs, interest is always tax-free and does not count toward any of these allowances, making them valuable once PSA headroom is used up.

Related guides

• Uk Personal Savings Allowance And Interest Tax 2026

More answers

• What is the Personal Savings Allowance for 2026/27?
• What is the ISA allowance for 2026/27?