Answers · UK 2025/26

What is the starting rate for savings and who qualifies for it in 2026/27?

The starting rate for savings lets you earn up to £5,000 of savings interest tax-free on top of your Personal Allowance and Personal Savings Allowance, but only if your other (non-savings) income is low. The £5,000 band shrinks by £1 for every £1 your other income exceeds the £12,570 Personal Allowance, disappearing entirely once other income reaches £17,570.

Last updated: 1 July 2026Last reviewed: 1 July 2026How we verify

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The starting rate for savings is a lesser-known 0% tax band that applies specifically to savings interest, aimed at people with low earnings from employment, self-employment, or pensions but who hold savings that generate interest. **How the £5,000 band works** For 2026/27, up to £5,000 of savings interest can be taxed at 0% under the starting rate for savings, but this band is reduced £1-for-£1 by any non-savings income (wages, self-employment profit, pension income, etc.) above your £12,570 Personal Allowance. Once your non-savings income reaches £17,570 (£12,570 + £5,000), the starting rate band is fully used up and reduces to £0. **Worked example: retiree with modest income** Margaret, retired, receives £14,000 a year in pension income and has £8,000 of savings interest from fixed-rate bonds. Her Personal Allowance covers the first £12,570 of pension income tax-free. The remaining £1,430 of pension income uses up £1,430 of her £5,000 starting rate band, leaving £3,570 of the starting rate band available for her savings interest at 0%. Her Personal Savings Allowance (£1,000 as a basic rate taxpayer) can then cover a further £1,000 of interest tax-free. Combined, £4,570 of her £8,000 interest is tax-free, and the remaining £3,430 is taxed at 20%. **Interaction with the Personal Savings Allowance** The starting rate for savings is applied BEFORE the Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate, £0 for additional rate). They stack, so someone with low non-savings income could receive up to £6,000 of tax-free interest (£5,000 starting rate plus £1,000 PSA) in addition to their Personal Allowance. **Who this typically helps** This band mainly benefits retirees living on modest pension income who hold significant cash savings, or anyone with a low-earning year (career break, part-time work, self-employment loss) who has savings interest. Higher earners with non-savings income above £17,570 get no benefit from the starting rate for savings at all, though they still get their normal Personal Savings Allowance.