Tax on savings interest in 2026/27: the allowances and what changes in 2027
Published · 3 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Most people pay no tax on savings interest because of two allowances. This guide explains the Personal Savings Allowance, the starting rate for savings, how tax is collected, and the rate rise planned for April 2027.
How interest is taxed
Interest from bank and building society accounts, credit union accounts and similar savings is counted as income. Whether tax is due depends on how much interest is earned, what other taxable income a person has, and which allowances apply. HMRC adds together the interest from all of a person's accounts.
Interest from Individual Savings Accounts (ISAs) and some National Savings and Investments products is usually tax free, so it does not use up these allowances.
Key figures for 2026/27
The Personal Savings Allowance depends on which Income Tax band a person falls into. To work that out, GOV.UK says to add the interest earned to other income.
The starting rate for savings
The starting rate for savings can make up to £5,000 of interest tax free. It is only available if other taxable income, not counting savings interest or dividends, is less than £17,570. Above the Personal Allowance of £12,570, it reduces by £1 for every £1 of other income.
It can be received alongside the Personal Savings Allowance. If the Personal Allowance is not fully used by wages, pension or other income, the unused part can also be set against savings interest.
If interest goes over the allowance
Tax is usually due on the amount above the allowance. GOV.UK gives an example: a basic rate taxpayer with £1,300 of interest has the first £1,000 untaxed, and the other £300 is taxed at 20%, which is £60.
Banks and building societies report interest to HMRC after 5 April each year. HMRC then sends a tax calculation by post or to a Personal Tax Account, showing any tax owed for the previous tax year.
- Interest on a joint account is split equally between the holders unless HMRC is told a different split applies.
- Children's accounts and foreign savings have their own rules, which are not covered here.
What changes from April 2027
The Government has published that tax rates on savings income will rise by two percentage points from 6 April 2027, for the 2027 to 2028 tax year. The new rates are 22% basic, 42% higher and 47% additional. These rates apply across the UK, including Scotland.
The Government has also said that from the same date, the Personal Allowance and other general reliefs will be set against other income first, and only then against property, savings and dividend income. The pages read for this guide do not give new allowance amounts, so the figures above apply to 2026/27 only.
Who this guide applies to, and who it does not
Check before you act
Rules, rates and allowances change, and personal circumstances differ. It can be worth confirming the details on the official pages linked below before relying on any figure here. Free help is available from MoneyHelper and Citizens Advice.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
