Tax on savings interest
Interest from bank and building society accounts is taxable income.
Interest from bank and building society accounts is taxable income.
Three allowances decide how much of it you pay tax on.
Interest is covered first by any personal allowance your wages or pension leave unused, then by the starting rate for savings, then by the personal savings allowance. Anything above those is taxed at your income tax rate.
HMRC adds together the interest from every account you hold. On a joint account it splits the interest equally between the holders unless you tell it otherwise.
The advisers for this subject: Sunny Bharj and Tony Springer
gov.uk, Tax on savings interest, and Income Tax Act 2007 s.12B, checked 26 October 2026. 2026/27 allowances.
To find your band, add all your interest to your other income. Interest that takes your total over £50,270 makes you a higher rate taxpayer for this purpose and halves the allowance.
With £16,000 of wages, the first £12,570 is covered by the personal allowance.
The remaining £3,430 of wages reduces the £5,000 starting rate for savings by £3,430, pound for pound.
£1,570 of starting rate remains, so £200 of interest is taxed at 0%.
Once your other taxable income reaches £17,570 the starting rate is used up and the personal savings allowance is what remains. The example is HMRC's own, on gov.uk.
You can pay £20,000 a year into ISAs, split across as many as you like, with no tax on the growth or the income. Some of the rules change on 6 April 2027.
Read more →Yes, and since April 2024 you can pay into more than one of the same type in a year, as long as the total stays within £20,000.
Read more →Under-65s can pay no more than £12,000 a year into cash ISAs. The overall allowance stays at £20,000.
Read more →HMRC publishes one on gov.uk, called Check how much tax you pay on dividends and interest from savings. You cannot use it if you file a Self Assessment return, have foreign income, or get Marriage Allowance or Blind Person's Allowance, and you need tax code 1257L.
No. It is per person, per tax year. HMRC adds the interest from all your accounts together and sets the allowance against the total.
It can. Your band is worked out with your interest added to your other income, so a salary just under £50,270 plus interest that takes the total over it reduces your allowance from £1,000 to £500.
Yes. From 6 April 2027 interest above your allowances is taxed at 22%, 42% or 47%. The same date brings a £12,000 annual limit on cash ISA payments for anyone under 65, within the £20,000 overall allowance. What is changing with cash ISAs in April 2027?
On your share of it. HMRC splits the interest equally between the holders, and you can contact HMRC if it should be split differently.
Yes, where your total income was below your personal allowance. Claim within four years of the end of the tax year, through your Self Assessment return if you file one, or with form R40.
Tax treatment depends on your individual circumstances and on current rules, both of which can change.
£1,000 a year at the basic rate, £500 at the higher rate, and up to £5,000 more under the starting rate for savings if your other income is low.
Read the answer →Not below £10,000 a year unless you file a tax return. Your bank tells HMRC, and HMRC collects any tax through your tax code.
Read the answer →At the same rates as the rest of the UK, and your personal savings allowance is decided by the UK bands.
Read the answer →Yes. Prizes are free of UK income tax and capital gains tax, and they do not use your personal savings allowance.
Read the answer →
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