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Do I pay tax on savings interest?

For people who earn interest on their savings.

Applies to: England, Scotland, Wales, Northern Ireland Last checked against official sources: 6 October 2026

Official figures may have changed. Check the source.

Most people can earn some interest tax-free. The Personal Savings Allowance is £1,000 for basic rate taxpayers, £500 for higher rate and £0 for additional rate.

  • If your other income is under £17,570, the starting rate for savings can make up to £5,000 of interest tax-free.
  • ISA interest is tax-free.
  • Banks report interest to HMRC, which sends a tax calculation if you owe.
  • From 6 April 2027, tax rates on savings income are due to rise to 22%, 42% and 47% across the UK.

Key facts

  • £1,000 basic rate
  • £500 higher rate
  • ISAs tax-free

What tax on savings interest is

Interest from bank, building society, savings and credit union accounts counts as income. It is added to your other income, such as wages or pension. Most people can earn some interest without paying tax on it, because up to three allowances can cover it.

The three allowances, in order

Allowance2026/27 amountWho gets it
Personal Allowance£12,570Any part not used by wages or pension can cover interest
Starting rate for savingsUp to £5,000People whose other income is under £17,570
Personal Savings Allowance£1,000, £500 or £0Basic, higher or additional rate taxpayers

The starting rate goes down by £1 for every £1 of other income above your Personal Allowance.

Example 1: low income

Pat gets £14,000 a year from pensions and £3,000 in interest.

  • Other income above £12,570: £1,430
  • Starting rate left: £5,000 minus £1,430 = £3,570
  • All £3,000 of interest is tax free

Example 2: basic rate taxpayer

Lee earns £40,000 and gets £1,500 in interest. Lee stays a basic rate taxpayer.

  • Personal Savings Allowance: £1,000
  • Taxable interest: £500
  • Tax at 20%: £100

Interest that is always tax free

  • Interest from ISAs
  • Some National Savings and Investments products

How HMRC knows and how you pay

After 5 April each year, your bank or building society tells HMRC how much interest it paid you. HMRC adds up the interest from all your accounts. For joint accounts, it splits the interest equally between you, unless you tell it otherwise.

If you owe tax, HMRC sends a tax calculation. It comes as a letter or as a message in your Personal Tax Account, and lists the accounts and interest. If you are employed or get a pension, HMRC may collect the tax by changing your tax code.

Things to know

  • Your interest can change your tax band. Add the interest to your other income to see which band you are in.
  • Rates are changing. From April 2027, the government plans to tax savings interest at 22%, 42% and 47%, up from 20%, 40% and 45%.
  • The rules are UK wide. In Scotland, savings interest is taxed at the same rates as the rest of the UK, not Scottish rates.

Related guides

Where this comes from

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Common questions

How does HMRC know about my savings interest?

After 5 April each year, your bank or building society tells HMRC how much interest it paid you.

How do I pay tax on savings interest?

If you owe tax, HMRC sends you a tax calculation, usually by letter or in your Personal Tax Account.

How is interest on a joint account taxed?

HMRC splits the interest equally between the account holders, unless you tell HMRC it should be split differently.

How does the starting rate for savings work?

If your other taxable income is under £17,570, up to £5,000 of interest can be tax free. It goes down by £1 for every £1 of income above your Personal Allowance.

Official sources

  1. 1.Tax on savings interest: how much is tax freewww.gov.uk/apply-tax-free-interest-on-savings/how-much-is-tax-free
  2. 2.Tax on savings interestwww.gov.uk/apply-tax-free-interest-on-savings
  3. 3.Income Tax: changes to tax rates for property, savings and dividend incomewww.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income
  4. 4.Tax on savings interest: if you need to pay taxwww.gov.uk/apply-tax-free-interest-on-savings/if-you-need-to-pay-tax

Checked against GOV.UK on 6 October 2026

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