Personal Savings Allowance Calculator

The short answer

• Basic-rate taxpayers can earn £1,000 of interest tax-free each year; higher-rate taxpayers £500; additional-rate taxpayers nothing.
• If your other income is under £17,570, up to £5,000 more can be tax-free under the starting rate for savings.
• Interest above that is taxed at 20%, 40% or 45%, rising to 22%, 42% and 47% from April 2027.
• Interest in ISAs is always tax-free and does not count.

Three ways interest is tax-free

1. Personal Allowance: the first £12,570 of all your income is tax-free. If your pay or pension does not use it all, the rest covers interest.
2. Starting rate for savings: up to £5,000 of interest taxed at 0%, for people with low other income.
3. Personal Savings Allowance: £1,000 or £500 of interest taxed at 0%, depending on your tax band.

The Personal Savings Allowance

Your Personal Savings Allowance depends on the highest tax band your total income reaches, including the interest itself. Interest that would push you over £50,270 can therefore halve your allowance. It is not a separate band of income: interest covered by the PSA still counts towards your total income, for example for the £100,000 Personal Allowance taper or the High Income Child Benefit Charge.

The starting rate for savings

The starting rate band is £5,000. It is reduced by £1 for every £1 of non-savings income (pay, pensions, rent, self-employed profit) above your Personal Allowance. So with other income of £14,000, the band is £5,000 − £1,430 = £3,570. With other income of £17,570 or more it is gone. Many pensioners and part-time workers have a large slice of tax-free interest without realising it.

The order the allowances apply

Income is taxed in a fixed order: non-savings income first, then savings interest, then dividends. Your Personal Allowance is used up by non-savings income first. Interest then uses any Personal Allowance left, then the starting rate, then the Personal Savings Allowance, and anything left is taxed at your rate. Dividends sit on top, so a large dividend can push your interest into a higher band.

Worked examples

Tax on interest at different incomes

Someone with no other income at all can earn £18,570 of interest tax-free: £12,570 of Personal Allowance, £5,000 starting rate and £1,000 PSA.

What counts as savings interest

• Interest from bank, building society and credit union accounts, including fixed bonds;
• interest from government and corporate bonds, and peer-to-peer lending;
• interest distributions from bond and money market funds held outside ISAs;
• some purchased life annuity payments.

Interest counts in the tax year it is paid or credited to your account, not when it builds up.

ISAs and Premium Bonds

See the Premium Bonds calculator to compare their expected return with a savings account.

How the tax is collected

Banks and building societies report interest to HMRC. If you are employed or get a pension, HMRC usually collects tax on interest by reducing your tax code for a later year, based on an estimate. If you fill in a Self Assessment return, you report the interest there. If you owe tax and HMRC has not contacted you, you must tell them; if your interest is under £10,000 you can ask them to collect it through your tax code.

Scottish taxpayers

Scottish Income Tax rates apply only to non-savings income. Savings interest is taxed at the UK rates of 20%, 40% and 45%, and your Personal Savings Allowance depends on the UK bands, so a Scottish taxpayer earning £45,000 pays the Scottish higher rate on pay but still gets the £1,000 allowance on interest.

Couples and joint accounts

Each person has their own allowances. Interest from a joint account is normally split equally between you. If one partner pays a lower rate of tax, holding more savings in their name can reduce the tax a couple pays, as long as the money genuinely belongs to them.

Savings tax from April 2027

From 6 April 2027 the rates of tax on savings interest rise by 2 points, to 22%, 42% and 47%. The allowances stay the same. A basic-rate taxpayer paying £100 tax on £500 of taxable interest would pay £110. Cash ISA contributions will be limited to £12,000 a year for under-65s from the same date.

Ways to pay less tax on savings

• Use your ISA allowance first for savings that earn more than your allowance.
• Choose accounts that pay interest each year, not all at the end of a long fix.
• Hold savings in the name of a partner with a lower tax rate.
• Pay more into a pension to keep your income in the basic-rate band, doubling your allowance.
• Consider Premium Bonds for some savings if you are a higher-rate taxpayer.

Savings interest and Self Assessment

You must fill in a Self Assessment return if your savings interest is £10,000 or more, or if you already file one for another reason, for example as self-employed. Otherwise HMRC normally deals with tax on interest automatically. Each year it receives figures from banks and building societies, then sends a calculation (a P800 or a Simple Assessment) or adjusts your tax code. Check these carefully: the figures sometimes include interest from ISAs or accounts you have closed.

Estimating your interest

To estimate interest for the year, multiply each balance by its rate. £30,000 at 4% earns about £1,200 a year; £25,000 at 4% earns £1,000, the whole basic-rate allowance. As a rule of thumb, at 4% a basic-rate taxpayer can hold about £25,000 outside ISAs before paying tax, and a higher-rate taxpayer about £12,500. If rates rise, the same savings earn more and you may cross the line without adding a penny.

Children's savings

Children have their own Personal Allowance, starting rate and Personal Savings Allowance, so most pay no tax on interest. The exception is money given by a parent: if it earns more than £100 a year, all of that interest is taxed as the parent’s. Grandparents’ gifts and Junior ISAs are not affected. See the Junior ISA calculator.

Pensioners and the starting rate

Many pensioners have income just above the Personal Allowance, so part of the starting rate band is still available. Someone with the full new State Pension of £12,547.60 and no other income has the whole £5,000 starting rate band and the £1,000 allowance, so can earn about £6,022 of interest tax-free. A small private pension reduces that pound for pound until other income reaches £17,570.

Interest near the higher-rate threshold

Because your allowance depends on the band your total income reaches, including interest, a small amount of extra interest can cost more than you expect. Suppose your salary is £49,500 and you earn £1,000 of interest. Your total income of £50,500 puts you in the higher-rate band, so your allowance falls from £1,000 to £500. The £230 of interest above £50,270 is taxed at 40%, and some of the rest at 20%, so a basic-rate taxpayer’s tax-free £1,000 turns into a tax bill. Paying a little more into a pension, or moving savings into an ISA, keeps you below the line and protects the full allowance.

The same applies at £125,140, where the allowance disappears completely, and between £100,000 and £125,140, where interest also reduces your Personal Allowance.

Savings and dividends together

If you have both savings interest and dividends, interest is taxed before dividends. Each has its own allowance: the Personal Savings Allowance for interest and the £500 dividend allowance for dividends. Dividends are taxed at 10.75%, 35.75% and 39.35% in 2026/27. Large dividends can push your total income into the higher-rate band and reduce your savings allowance from £1,000 to £500, even though the dividends are taxed after the interest. The calculator includes dividends under More options so you can see the effect.

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