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

Full answer

In 2026/27 the Personal Savings Allowance (PSA) depends on your highest tax band. Basic-rate (20%) taxpayers get GBP 1,000 of savings interest tax-free, higher-rate (40%) taxpayers get GBP 500, and additional-rate (45%) taxpayers get GBP 0. The PSA covers interest from bank and building society accounts, credit union accounts and most bonds, but ISA interest is always tax-free and does not count. Worked example: Priya earns a GBP 60,000 salary, making her a higher-rate taxpayer (the higher-rate threshold is GBP 50,270). She also earns GBP 1,200 of savings interest. Her PSA is GBP 500, so GBP 500 is tax-free. The remaining GBP 700 is taxed at her 40% marginal rate, costing GBP 280. If she had instead held those savings in an ISA (GBP 20,000 annual allowance), all GBP 1,200 would be tax-free. Watch the band boundary: if extra savings interest pushes your total income over GBP 50,270, you move from the GBP 1,000 to the GBP 500 allowance, and the interest above the threshold is taxed at 40%. Separately, the starting rate for savings (up to GBP 5,000) can apply if your non-savings income is low, but it tapers away once non-savings income exceeds the Personal Allowance of GBP 12,570. Use the income-tax calculator to see how savings interest stacks on top of your salary and which band it falls into. For the precise rules and how HMRC collects tax on interest, check gov.uk.

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More answers

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