Tax on savings interest: how it is worked out and how you pay it

Tax year 2026-27 · Figures checked against GOV.UK on 14 November 2026

Do you pay tax on savings interest?

GOV.UK says you may have to pay tax on interest from bank and building society accounts, savings accounts and credit union accounts. Whether you do depends on how much interest you earn, your other taxable income and your tax-free allowances. HMRC adds together the interest from all your accounts, and for a joint account it splits the interest equally between the account holders.

GOV.UK says you do not usually have to pay tax on interest from accounts like Individual Savings Accounts (ISAs).

What can cover your interest

Up to three things can cover savings interest before any tax is due:

• Your Personal Allowance (£12,570), if your other income does not use all of it.
• The starting rate for savings, a band of up to £5,000 of interest. GOV.UK says you can get it if your other income, not including savings interest or dividends, is less than £17,570. Every £1 of other income above your Personal Allowance reduces it by £1.
• The Personal Savings Allowance: £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and £0 for additional rate taxpayers.

GOV.UK says you can get the starting rate for savings as well as a Personal Savings Allowance. To find your Income Tax band, and so your Personal Savings Allowance, GOV.UK says to add all the interest you have earned to your other income. If your interest is above what covers it, you usually pay Income Tax on the amount above.

GOV.UK says you pay tax on any interest over your allowance at your usual rate of Income Tax. For 2026-27 in England, Wales and Northern Ireland, GOV.UK lists the basic rate as 20% and the higher rate as 40%. GOV.UK says that in Scotland you pay the same tax as the rest of the UK on savings interest, but the examples below use bands for England, Wales and Northern Ireland and may differ if you live in Scotland.

For more on the two savings allowances, see our explainer on the Personal Savings Allowance and the starting rate for savings.

Three worked examples

Each uses 2026-27 figures and has no starting rate unless it says so.

• Basic rate: £30,000 of other income and £2,000 of interest. Their other income is well above £17,570, so there is no starting rate. £30,000 plus £2,000 is £32,000, which is in the basic rate band, so the Personal Savings Allowance is £1,000. The other £1,000 is taxed at 20%, which is £200.
• Higher rate: £55,000 of other income and £1,500 of interest. They are in the higher rate band, so the Personal Savings Allowance is £500. The other £1,000 is taxed at 40%, which is £400.
• Low income: £10,000 of other income and £1,500 of interest. Their other income leaves £2,570 of the £12,570 Personal Allowance unused, which covers all £1,500 of interest, so no tax would be due.

In practice your interest can straddle two bands, in which case part of it is taxed at each rate. These examples are simplified.

How you pay any tax

After 5 April each year your bank or building society tells HMRC how much interest it paid you. What happens next depends on you, according to GOV.UK:

• If you already send a Self Assessment tax return, you report your savings interest on it.
• If you are employed or get a pension, HMRC usually sends a tax calculation and normally collects the tax through your tax code.
• If you have no tax code, or it cannot be changed, HMRC may send a Simple Assessment letter that says how much you owe and when to pay.
• If you owe tax and have no letter by 31 March of the following tax year, you must contact HMRC.
• If you have more than £10,000 of savings interest, you must report it on a Self Assessment tax return. If you are not registered, you need to register.

You can check HMRC's estimate in your Personal Tax Account and compare it with your bank statements. If it looks wrong, GOV.UK says to contact HMRC for a new tax code.

Changes to watch

Higher tax on savings interest was part of the changes announced at the Autumn Budget 2026. Our post on what changes covers them. They are announced, not yet in force.

Estimate your own tax

The SavingTax app has a free Savings Interest Tax calculator, which you can use on the web when you are signed in. It estimates the tax on your savings interest, the Personal Savings Allowance that applies and your starting rate for savings, for tax years 2021-22 to 2026-27. It is an estimate. It does not cover ISAs, Premium Bonds, trusts or a different tax code. The app also has a guide on tax on savings interest.

Sources

• GOV.UK: Tax on savings interest
• GOV.UK: How much of your savings interest is tax-free
• GOV.UK: How you pay tax on your savings interest
• GOV.UK: Income Tax rates and Personal Allowances
• GOV.UK: Scottish Income Tax

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.