The £5,000 Starting Rate for Savings: A Worked Example for Part-Time Workers 2026/27
How the 0% starting rate for savings combines with the Personal Savings Allowance for lower earners in 2026/27, with a worked example for a part-time worker earning £14,000.
Two allowances, stacked on top of each other
Most people know about the £1,000 Personal Savings Allowance, but far fewer know about the separate starting rate for savings — a 0% tax band of up to £5,000 that sits specifically for savings interest, applied before the Personal Savings Allowance in HMRC's tax calculation order. For lower earners, particularly part-time workers, this can mean a genuinely large amount of savings interest is tax-free — far more than the £1,000 figure most people assume is the limit.
Savings Interest Tax Calculator
Calculate how much tax you owe on your savings interest, taking into account your Personal Savings Allowance and starting rate.
Open Savings Tax calculatorHow HMRC's ordering actually works
Income is taxed in a specific order: non-savings income (salary, pension, self-employment profit) first, using up the personal allowance and basic-rate band; then savings income; then dividend income. The starting rate for savings band sits immediately after the personal allowance in this order, covering up to £5,000 of savings interest at 0% — but only to the extent that non-savings income has not already used up that space. For every £1 of non-savings income above the £12,570 personal allowance, the £5,000 starting rate band shrinks by £1, disappearing entirely once non-savings income reaches £17,570.
Worked example: a part-time worker earning £14,000
Salary: £14,000. Non-savings income above personal allowance: £14,000 − £12,570 = £1,430.
Starting rate band remaining: £5,000 − £1,430 = £3,570.
Personal Savings Allowance: £1,000 (basic-rate taxpayer, since their total income keeps them in the basic-rate band).
Total tax-free savings interest available: £3,570 (starting rate) + £1,000 (Personal Savings Allowance) = £4,570.
This part-time worker could earn up to £4,570 in savings interest in the tax year without paying any tax on it at all — a substantially larger figure than someone might expect if they had only heard of the £1,000 Personal Savings Allowance.
Worked example: someone with no salary at all
A retired person with only £8,000 of state pension income and no other non-savings income has £4,570 of unused personal allowance (£12,570 − £8,000), meaning their non-savings income does not exceed the personal allowance at all. In this case, the full £5,000 starting rate band remains available, on top of their £1,000 Personal Savings Allowance — up to £6,000 of savings interest could be received completely tax-free in the year.
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Open Pro-Rata Salary calculatorWhy this matters for part-time workers and low earners specifically
People working part-time, taking a career break, on maternity or paternity leave, or otherwise earning below or only modestly above the personal allowance are the group most likely to have significant unused starting rate band. For anyone in this position holding meaningful cash savings — perhaps built up before reducing hours, or held jointly with a higher-earning partner but taxed on an individual basis — actively checking this allowance, rather than assuming savings interest will simply be taxed, can reveal a much more favourable position than expected.
uk-personal-savings-allowance-and-interest-tax-2026Does it require any action?
For most people taxed through PAYE, HMRC calculates this automatically using reported income data, including interest reported directly by banks and building societies. However, it is worth checking your PAYE tax code or Self Assessment computation reflects the starting rate correctly, particularly in a year where income has changed significantly (such as reducing to part-time hours), since HMRC's automatic calculations do not always catch a mid-year change promptly.
Bottom line
The starting rate for savings is a frequently overlooked allowance that can combine with the Personal Savings Allowance to shelter up to £6,000 of savings interest a year for someone with little or no other income, and a meaningful amount even for a modest part-time salary. It is worth actively checking this position rather than assuming only the £1,000 Personal Savings Allowance applies, particularly for part-time workers, career-break parents, and low-income retirees with cash savings.
Estimate your own tax-free savings interest position with the savings interest tax calculator.
Sources
Frequently asked questions
What is the starting rate for savings?
The starting rate for savings is a 0% tax band of up to £5,000 that can apply to savings interest for people with relatively low non-savings income, on top of the separate Personal Savings Allowance.
How does the starting rate for savings interact with your other income?
The £5,000 starting rate band is reduced by £1 for every £1 of non-savings income (such as salary or pension) above the personal allowance, meaning it shrinks to zero once non-savings income reaches £17,570 (personal allowance of £12,570 plus £5,000).
Can someone get both the starting rate and the Personal Savings Allowance tax-free on savings interest?
Yes — the two work together. Savings income is taxed after non-savings income uses up the personal allowance, then the 0% starting rate applies to the next slice (up to £5,000, tapered by other income), and the Personal Savings Allowance applies on top of that.
How much tax-free savings interest could a low earner receive in total?
For someone with no non-savings income above the personal allowance, combining the full £5,000 starting rate with the £1,000 Personal Savings Allowance means up to £6,000 of savings interest could be received completely tax-free in a single tax year.
Does a part-time worker earning £14,000 qualify for any starting rate for savings?
Yes, partially — because their salary of £14,000 exceeds the £12,570 personal allowance by £1,430, the £5,000 starting rate band is reduced by that same £1,430, leaving £3,570 of starting rate band still available for savings interest, on top of their Personal Savings Allowance.
Do pension contributions affect how much starting rate for savings is available?
Yes — reducing taxable non-savings income, for example through relief-at-source pension contributions or salary sacrifice, can increase how much of the £5,000 starting rate band remains available, since the taper is based on non-savings income above the personal allowance.
Does the starting rate for savings apply automatically, or do I need to claim it?
It applies automatically through HMRC's tax calculation based on your reported income; most people with interest below the relevant thresholds who are taxed through PAYE will not need to do anything, though it is worth checking your tax code or Self Assessment computation reflects it correctly.
What happens if a part-time worker's savings interest exceeds their combined tax-free allowances?
Any interest above the combined starting rate and Personal Savings Allowance is taxed at the individual's marginal income tax rate, most commonly 20% for a basic-rate taxpayer, either through an adjusted tax code or via Self Assessment if required.
Is the starting rate for savings the same across all parts of the UK?
Yes — the starting rate for savings and Personal Savings Allowance are UK-wide reserved matters set by the UK government, applying identically to taxpayers in England, Wales, Northern Ireland and Scotland, even though Scottish income tax bands otherwise differ.
Where can I check how much of my savings interest is likely to be tax-free?
The savings interest tax calculator can estimate your position, taking into account both the starting rate for savings and your Personal Savings Allowance based on your total income.
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