Key facts
- Personal Savings Allowance: £1,000 (basic rate), £500 (higher rate), £0 (additional rate)
- Starting rate for savings: up to £5,000 at 0% for low earners, reduced by other income above the Personal Allowance
- ISA interest is always tax free and does not use the Personal Savings Allowance
- Report savings interest through self assessment if total savings income exceeds £10,000
See how ISAs shelter interest in our ISA guide UK, model growth with the savings calculator, and compare Cash ISA vs Stocks and Shares ISA. Use the income tax calculator to check your tax band.
The Personal Savings Allowance
The Personal Savings Allowance (PSA) is a tax free band for savings interest earned outside an ISA. For 2026/27 it is:
- £1,000 for basic rate taxpayers
- £500 for higher rate taxpayers
- £0 for additional rate taxpayers
It applies to interest from bank and building society accounts, credit union accounts, and most other taxable savings products. It does not apply to interest inside an ISA.
The starting rate for savings
There is also a £5,000 starting rate for savings band at 0% for people with low other income. The band is reduced by £1 for every £1 of other income above your £12,570 Personal Allowance, so it mainly helps lower earners whose wages or pensions use little of the Personal Allowance.
The starting rate works alongside the PSA. HMRC applies the rules in a set order when calculating what you owe.
ISAs and tax free interest
Interest inside a Cash ISA (or dividends and gains inside a Stocks and Shares ISA) is always tax free. It does not count toward your Personal Savings Allowance and does not appear on your tax return unless you choose to report it.
That is why higher and additional rate taxpayers often use ISAs once taxable savings interest would exceed their PSA. See our ISA guide UK for the £20,000 allowance and transfer rules.
How you pay any tax due
In most cases HMRC collects tax on savings interest by adjusting your tax code. Your employer or pension provider applies the code, and tax is taken from your pay or pension automatically.
If your total savings income is over £10,000, you may need to report it through a self assessment tax return. Use our self assessment calculator to estimate what you might owe if you file a return.
A worked example
Higher rate taxpayer with £600 of interest
A higher rate taxpayer earns £600 of taxable savings interest in 2026/27. The Personal Savings Allowance covers the first £500 tax free. The remaining £100 is taxed at 40%, so the tax due is about £40.
Savings Calculator
Estimate how much interest your savings could earn before using your allowance.
Related Calculators
Frequently Asked Questions
Basic rate taxpayers can earn £1,000 of interest tax free, higher rate £500, and additional rate £0, under the Personal Savings Allowance.
A tax free band for savings interest outside an ISA, set at £1,000, £500, or £0 depending on your tax band.
No. Interest inside an ISA is always tax free and does not use the Personal Savings Allowance.
A £5,000 band for people with low other income, reduced by other income above the Personal Allowance.
HMRC usually adjusts your tax code. You may report it through self assessment if savings income is over £10,000.
Yes, it is taxable income outside an ISA, but the Personal Savings Allowance covers a set amount tax free.
No. The Personal Savings Allowance is £0 for additional rate taxpayers.
Hold the savings in a Cash ISA, where the interest is always tax free.
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James Hartley is a CIMA qualified financial analyst and Founder and Lead Financial Analyst at WhatsUK, with 8+ years in UK tax, payroll, and compliance. He builds every calculator on WhatsUK and authors all editorial content, ensuring every figure is verified against official HMRC sources before publication.
Sources & Official References
- GOV.UK Tax on savings interest- Personal Savings Allowance for 2026/27
Last verified:
Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.