The Personal Savings Allowance and the starting rate for savings
How much savings interest you can earn tax-free, how the two allowances combine and when you could owe tax.
The Personal Savings Allowance
GOV.UK says that, depending on which Income Tax band you are in, you may be able to earn some interest without paying tax on it. The Personal Savings Allowance is:
- £1,000 for basic rate taxpayers
- £500 for higher rate taxpayers
- £0 for additional rate taxpayers
If your interest is above your allowance, you usually pay Income Tax on the amount above it.
The starting rate for savings
GOV.UK says that if your other taxable income, not including savings interest or dividends, is less than £17,570, you could also get the starting rate for savings. This is a band of up to £5,000 of interest. The more you earn from other income, such as wages or a pension, the less your starting rate for savings will be: every £1 of other income above your Personal Allowance reduces it by £1.
Your Personal Allowance can also cover savings interest if your other income does not use all of it, and you can get the starting rate for savings as well as the Personal Savings Allowance.
Two worked examples
- A basic rate taxpayer with £1,500 of interest and no starting rate. The first £1,000 is covered by the Personal Savings Allowance. The other £500 is taxed at 20%, which is £100.
- Someone with £14,570 of other income and £4,000 of interest. Their other income is £2,000 above the £12,570 Personal Allowance, so their starting rate for savings is £5,000 − £2,000 = £3,000. The first £3,000 of interest falls in that band, and the remaining £1,000 is covered by a £1,000 Personal Savings Allowance, so no tax would be due on the interest.
What about ISAs?
GOV.UK says you do not usually have to pay tax on interest earned from savings in accounts like Individual Savings Accounts (ISAs).
Changes to watch
Savings tax rates were part of the changes announced at the Autumn Budget 2026. Our post on what changes covers them, and the dates are announced, not yet in force.
Check your own figures
The SavingTax app has a guide on tax on savings interest and a free Budget 2026 changes timeline. Premium can add savings income to your plan and compare tax years.
Sources
This page is general information, not financial, tax or legal advice. The examples are simplified and use 2026-27 rates for England, Wales and Northern Ireland. Your own position depends on your circumstances. For advice, speak to a qualified professional.