Savings interest can give your money a welcome boost. But how much can you earn before HMRC wants a share? The answer depends on your other income, tax band and available allowances.

The tax on savings interest for 2026/27 follows existing rules, but announced rate increases are due from April 2027. Here’s how the allowances work, what you might owe and what to check before the next tax year.

How is savings interest taxed in 2026/27?

The tax year runs from 6 April 2026 to 5 April 2027. When working out tax on savings interest, remember that interest from most ordinary UK bank and building society accounts is paid without tax deducted. You may still owe Income Tax if your interest exceeds the allowances available to you.

For 2026/27, savings income is generally taxed at 20% for basic-rate taxpayers, 40% for higher-rate taxpayers and 45% for additional-rate taxpayers. Your total taxable income helps determine your band. Interest can push some income into a higher band, so don’t assess your savings in isolation.

Read HMRC’s guidance on tax-free savings interest for the rules and exceptions.

Personal Savings Allowance for 2026/27

The Personal Savings Allowance (PSA) lets you receive a certain amount of taxable savings interest at 0% tax.

Tax band	Personal Savings Allowance
Basic-rate taxpayer	£1,000
Higher-rate taxpayer	£500
Additional-rate taxpayer	£0

These allowances only reduce tax on savings interest, not tax on all your income. Your tax band depends on your overall taxable income, including savings interest. If your income crosses a threshold, your allowance may change.

For example, a basic-rate taxpayer earning £800 in savings interest would usually pay no tax on that interest, assuming the full allowance is available and no other rules affect the calculation. A higher-rate taxpayer with £700 in interest would generally have £200 above their £500 allowance, taxed at the applicable savings rate.

See HMRC’s Personal Savings Allowance guidance.

What is the starting rate for savings?

People with lower non-savings income may qualify for an additional tax-free band called the starting rate for savings. It allows up to £5,000 of savings interest at 0%, but not everyone receives the full amount.

For 2026/27, your other taxable income must be below £17,570 to qualify. Every £1 of other income above the £12,570 Personal Allowance reduces the £5,000 starting-rate band by £1. You may also qualify for the PSA.

Example: if your wages are £16,000, they exceed the Personal Allowance by £3,430. Your starting-rate band falls from £5,000 to £1,570. If you earn £200 in savings interest, that interest can fall within the remaining 0% band, assuming the relevant conditions are met.

Check HMRC’s savings interest rules before calculating your own position.

Worked examples: how much tax could you pay?

These simplified tax on savings interest examples assume the stated tax band and full PSA are available.

Taxpayer	Interest	Allowance	Taxable	Tax due
Basic rate (20%)	£1,300	£1,000	£300	£60
Higher rate (40%)	£900	£500	£400	£160
Additional rate (45%)	£600	£0	£600	£270

The starting rate for savings or unused Personal Allowance could reduce your tax on savings interest further. These examples exclude those reliefs and assume the interest falls entirely within the stated band. Your actual calculation may differ.

What changes from April 2027?

The government has announced a two-percentage-point increase in savings income tax rates from 6 April 2027. The published rates for 2027/28 are:

Savings tax band	2026/27	From April 2027
Basic rate	20%	22%
Higher rate	40%	42%
Additional rate	45%	47%

These changes were announced previously. The official policy paper sets out the planned rates.

The Personal Savings Allowance and starting rate for savings are separate rules, and the published policy says these allowances stay the same. Don’t confuse the savings income changes with the separate changes to dividend and property income tax.

What can savers do now?

A little preparation on your tax on savings interest can prevent an unwelcome tax calculation later.

• Add up interest across all your savings accounts.
• Check your total taxable income and likely tax band.
• See whether you qualify for the starting rate for savings.
• Consider whether an ISA suits your needs. Interest earned inside a qualifying ISA is generally tax-free.
• Review your HMRC tax code or Self Assessment position if your interest changes significantly.

Banks and building societies usually report interest to HMRC, so tax on savings interest rarely goes unnoticed. If you already complete Self Assessment, report your savings interest there and keep an eye on the Self Assessment deadline. Different reporting rules can apply depending on the amount received and your circumstances.

Frequently asked questions

Check your position before April

The tax on savings interest for 2026/27 depends on more than the interest rate your bank offers. Your income, allowances and account type all matter.

If you have several income sources or aren’t sure which rules apply, contact Cangaf Accountants for practical help understanding your tax position.

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