Personal Savings Allowance explained: how much interest is tax free? (2026/27)
How much savings interest you can earn tax free in the UK: the £1,000 and £500 Personal Savings Allowance, the £5,000 starting rate for savings, the April 2027 tax rise and how to avoid paying tax on savings.
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How much interest is tax free?
| Your income tax band | Personal Savings Allowance |
|---|---|
| Basic rate (income up to £50,270) | £1,000 a year |
| Higher rate (£50,271 to £125,140) | £500 a year |
| Additional rate (over £125,140) | £0 |
The allowance is based on your total taxable income, including the interest itself.
The starting rate for savings
If your other income is low, you may get up to £5,000 more interest tax free on top of the Personal Savings Allowance.
It works like this: if your income from wages, pensions and self-employment is under £17,570 (the £12,570 personal allowance plus £5,000), every pound below £17,570 gives you a pound of the starting rate. Once your other income reaches £17,570, it is gone.
What counts as savings interest?
- Bank and building society interest
- Interest from savings apps and money market accounts outside an ISA
- Interest on cash held in an investment account outside an ISA
- Interest from bonds and peer-to-peer lending
Premium Bonds prizes and interest inside an ISA do not count.
How much do you need saved to go over?
It depends on your rate. At 4% interest:
| Allowance | Savings before tax is due |
|---|---|
| £1,000 (basic rate) | About £25,000 |
| £500 (higher rate) | About £12,500 |
Higher rate taxpayers reach the limit with surprisingly modest savings.
Tax on savings from April 2027
The October 2026 Budget raised tax on savings interest above your allowance from 6 April 2027:
| Taxpayer | Now | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
The allowances themselves are not changing.
How you pay tax on savings
Banks pay interest without taking tax off. HMRC gets interest figures from banks and usually collects any tax by changing your PAYE tax code. If you file Self Assessment, you include it on your return.
How to keep savings interest tax free
- Use a cash ISA. You can put up to £20,000 a year into ISAs, and the Budget kept the full amount available for cash.
- Split savings with a partner who has unused allowance, if it is a shared pot.
- Consider Premium Bonds, where prizes are tax free.
- Use a pension for long-term saving, with tax relief on the way in.
Common questions
Do I need to tell HMRC about savings interest?
Usually not. Banks report it to HMRC, which adjusts your tax code if you owe tax. If you file a Self Assessment return, include your interest there.
Does a regular saver count towards the allowance?
Yes. Interest from any account outside an ISA counts, including regular savers and fixed-rate bonds.
Is interest on a fixed-term bond taxed when it is paid or when it is earned?
When it is paid or credited to you. A bond that pays all its interest at the end can push you over your allowance in that one year.
This is general information, not personal tax or financial advice. Tax rules change and depend on your circumstances, so check GOV.UK or speak to an accountant before acting.