Personal Savings Allowance explained: how much savings interest is taxable?

The Personal Savings Allowance (PSA) determines how much eligible savings interest you can receive at a 0% savings tax rate, depending on your income tax band. It does not limit the amount you may save. Instead, it affects the interest on taxable savings and some other forms of savings income.

Personal Savings Allowance for 2026/27

For the UK tax year from 6 April 2026 to 5 April 2027, the PSA is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. These allowances are per person across relevant savings income, not per bank account. Your band can be affected by interest itself: HMRC says to include all interest when determining the tax band.

The UK-wide savings income tax rates for 2026/27 are 20%, 40% and 45% for the basic, higher and additional bands respectively. These are not the same as Scottish non-savings income bands. Legislation and announced changes may affect later tax years, so do not use this year’s figures indefinitely.

Which interest counts towards the allowance?

Taxable bank and building society interest is the most common example. Some credit union, bond and investment income can also be treated as savings income. Interest in an eligible ISA is generally exempt from income tax and is not included in your PSA calculation. For joint accounts HMRC normally treats interest as split equally between the account holders, unless a different ownership split is established.

When planning, add the relevant interest from all taxable accounts in the same tax year. Do not apply the full allowance separately to each provider, and do not confuse the total balance saved with the interest earned on it.

Worked example: £1,400 of savings interest

Suppose a basic-rate taxpayer expects £900 interest from one account and £500 from another during 2026/27, with no other special tax circumstances. Total taxable savings interest is £1,400. After the £1,000 PSA, £400 remains subject to tax; a simplified 20% calculation gives £80. A higher-rate taxpayer with the same interest would instead have £900 above a £500 PSA, and a simple 40% estimate would be £360. Actual tax depends on how the income interacts with other allowances and bands.

Enter your interest across accounts and selected tax band in the Personal Savings Allowance Calculator. It gives a useful first approximation, not a full HMRC assessment.

Why low-income savers may pay less than the simple estimate

The separate starting rate for savings can allow up to £5,000 of savings income at 0% where non-savings income is low enough. The maximum is reduced by £1 for each £1 of relevant other income above the Personal Allowance; the ordinary starting rate is unavailable once other income reaches £17,570, assuming the standard Personal Allowance. Any unused Personal Allowance may also affect the outcome. The simplified PSA calculator does not model these interactions.

What if interest pushes you into another tax band?

Income and savings interest together can change which band applies and consequently reduce your PSA. A flat 20%, 40% or 45% on one amount may not reflect the real marginal calculation if income crosses a threshold. Check a tax return, your tax code or HMRC guidance if you are close to a band boundary or have substantial interest. Keep statements showing interest paid or credited in each relevant tax year.

ISA accounts and planning ahead

An ISA can shelter eligible returns from UK income tax, subject to its separate annual subscription limits and product rules. It is not automatically the best account: compare rates, access, fees and eligibility as well as tax. You can use the Savings Interest Calculator to project interest and then evaluate whether an estimated taxable amount warrants further advice.

See HMRC’s tax on savings interest guidance and the official income tax rates and allowances before relying on any estimate.

Tax on your cash savings may also change whether saving or paying down your mortgage looks better; compare them in mortgage overpayment versus savings guide.