What is the Personal Savings Allowance in 2026/27?

Full answer

The Personal Savings Allowance (PSA) was introduced in April 2016 and allows most savers to receive bank interest gross (without tax deducted at source), paying tax only if interest exceeds their PSA. **2026/27 PSA rates:** | Tax band | Personal Savings Allowance | |---|---| | Basic-rate taxpayer (20%) | **£1,000** | | Higher-rate taxpayer (40%) | **£500** | | Additional-rate taxpayer (45%) | **£0** | **How it works:** Banks and building societies pay interest gross. HMRC adjusts your tax code to collect any tax owed on interest above your PSA — you rarely need to file a return for savings interest alone unless you are completing SA already. **Starting rate for savings (stacks with PSA):** If your non-savings income (salary, self-employment, pension) is below £17,570, you may also qualify for the **£5,000 starting rate for savings** at 0% — in addition to the PSA. The two allowances stack (they do not replace each other). **ISA vs PSA:** ISA interest does not use your PSA — it is separately tax-free. You can maximise both: earn £1,000 (or £500) in a savings account free of tax AND hold any amount in a Cash ISA with no tax at all. **With rising interest rates, the PSA is increasingly being exceeded:** At 5% interest, a basic-rate taxpayer needs savings of **£20,000** to hit the £1,000 PSA limit; a higher-rate taxpayer reaches their £500 limit with just £10,000 in savings. Savers above these levels benefit from moving excess savings into an ISA to avoid income tax on interest.

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