What is the Personal Savings Allowance for 2026/27?

Full answer

The Personal Savings Allowance (PSA) is the amount of interest you can earn from savings outside an ISA before paying tax. For 2026/27 it is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and £0 for additional-rate taxpayers (those with income over £125,140). Interest above your PSA is taxed at your marginal Income Tax rate. There is also a separate starting rate for savings: if your non-savings income (mainly salary and pensions) is below £17,570, you can earn up to £5,000 of savings interest at a 0% starting rate, reducing £1 for every £1 of non-savings income above the £12,570 Personal Allowance — very valuable for low earners and some retirees. Worked example: a basic-rate taxpayer with £1,500 of savings interest uses their £1,000 PSA tax-free, then pays 20% on the remaining £500 = £100. A higher-rate taxpayer with the same £1,500 uses a £500 PSA, then pays 40% on £1,000 = £400. The PSA applies UK-wide, but a Scottish taxpayer's rate band status is determined by Scottish thresholds. Banks no longer deduct tax at source, so HMRC usually collects any tax due through a change to your PAYE tax code. With higher interest rates in recent years, many savers have breached their PSA for the first time — moving savings into a Cash ISA (£20,000 annual allowance) shelters interest completely. Use the ISA or Savings calculator to compare taxed and tax-free interest.

Try the calculator

More answers

• Do I pay tax on ISA withdrawals?
• When do I start paying higher-rate tax in the UK?