Answers · UK 2025/26
When do I pay tax on my UK savings interest?
You pay tax on savings interest above the Personal Savings Allowance: £1,000 (basic-rate taxpayers), £500 (higher-rate), £0 (additional-rate). Interest in ISAs is always tax-free. Starting Rate Band of £5,000 also applies if your other income is low.
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UK tax on savings interest 2025/26 follows a layered system. Personal Savings Allowance (PSA): £1,000 tax-free for basic-rate (20%) taxpayers, £500 for higher-rate (40%), £0 for additional-rate (45%). Starting Rate for Savings: up to £5,000 at 0% tax, but this allowance reduces £1-for-£1 for each £1 of non-savings income above the Personal Allowance. So if your non-savings income reaches £17,570 (£12,570 PA + £5,000), the Starting Rate is fully used up. Example: £15,000 employment income + £4,000 savings interest. Non-savings income uses £2,430 of starting rate (£17,570 − £15,000). Remaining £2,570 of starting rate covers part of savings interest at 0%. Then PSA covers £1,000 more at 0%. Last £430 of interest taxed at 20%. ISA interest is always tax-free regardless of amount. Premium Bond winnings: tax-free. NS&I Income Bonds: PSA applies. Banks pay interest gross (no tax at source since 2016) — you must declare excess interest in Self Assessment or through your tax code.
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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.