Tax on Savings Interest UK

If you have no other taxable income, you can earn up to £18,570 of savings interest tax-free in 2026-27 — that's your Personal Allowance (£12,570) plus the starting rate for savings (£5,000) plus the Personal Savings Allowance (£1,000). If your salary, pension or other income already uses up your Personal Allowance and starting rate, you're left with just the Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate, and £0 for additional-rate.

The Personal Savings Allowance (PSA) is a 0% tax rate band on savings interest: £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and £0 for additional-rate taxpayers. It applies to interest from bank and building society accounts, gilts, corporate bonds and peer-to-peer lending — not to ISA interest, which is always tax-free regardless of amount.

The starting rate for savings is a separate £5,000 0% band that sits on top of your Personal Allowance, but it only applies to savings interest, and only if your non-savings income (salary, pension, self-employment profit) is low. It's tapered £-for-£ by non-savings income above your Personal Allowance, so it disappears completely once your other income exceeds £17,570. This mainly helps retirees, low earners and people on a career break who live partly off savings interest.

Most people don't need to do anything. Banks and building societies report interest paid to HMRC automatically, and HMRC estimates your tax bill and collects it by adjusting your PAYE tax code (so it comes out of your salary or pension automatically) or by adjusting your Self Assessment bill if you already file a return. You only need to tell HMRC yourself if your untaxed interest is large or your circumstances change — see the GOV.UK page linked below.

If you already complete Self Assessment for another reason, yes — include all taxable interest on the return, even if it's within your Personal Savings Allowance (HMRC uses the return to check the allowance is applied correctly). If you don't already file Self Assessment, you generally don't need to register just because of savings interest — HMRC collects any tax due through your tax code instead, based on data reported by your bank.

No. Interest earned inside a Cash ISA, or interest-paying investments inside a Stocks & Shares ISA, is always completely tax-free — it doesn't use up your Personal Allowance, starting rate for savings, or Personal Savings Allowance, and it never needs to be declared. Moving taxable savings into an ISA is the simplest way to stop paying tax on interest going forward. See our ISA allowance page for the current limits.

Yes — savings interest stacks on top of your non-savings income (salary, pension, self-employment) when working out which tax band you're in, so a large interest payment can push some of it into a higher band even if your salary alone wouldn't. That's also what sets your Personal Savings Allowance tier: it's based on your highest band once savings interest is included, not just your salary.