Include taxable income from all sources, including savings interest but excluding tax-free accounts
• If you're employed or in receipt of a pension, HMRC will adjust your tax code and send a tax calculation letter. If not received by 31 March of the following tax year you must contact HMRC.
• If you're self-employed and already complete a Self Assessment, you should declare any interest earned on your tax return.
• If your income from savings and investments exceeds £10,000 then you must complete a Self Assessment tax return, it is your responsibility to do so, HMRC will not ask you to do this.
• If none of the above apply, HMRC will tell you how much you owe and how to make payment of any tax due.
The Personal Savings Allowance (PSA) is the maximum amount of tax-free interest you can earn from your savings in a single tax-year (6 April to 5 April). While it doesn’t limit the overall amount of interest you can earn on your savings, anything above your allowance is subject to your usual rate of Income Tax.
Before the Personal Savings Allowance came about in 2016, many savers had to pay tax on all interest they earned. However, its introduction (and the low-interest rate environment at the time) meant this was no longer the case for most people (according to the Building Societies Association).
Nevertheless, the allowance hasn’t been reviewed in over a decade – even though interest rates have risen and more people are being pushed into higher tax brackets (through a combination of wage inflation and frozen tax thresholds). As a result, an increasing number are breaching their Personal Savings Allowance and having to pay tax on the interest they earn.
The Personal Savings Allowance varies based on your Income Tax band and, as of the 2026/27 tax-year, stands at:
| Tax Band | PSA | Tax on interest above PSA |
| Basic rate | £1,000 | 20% |
| Higher rate | £500 | 40% |
| Additional rate | £0 | 45% |
The ‘starting rate for savings’ is additional to the Personal Savings Allowance and enables those with an annual income below £17,570 to earn up to £5,000 in savings interest without needing to pay tax.
While someone with an annual income equivalent to or less than the Personal Allowance (£12,570) is entitled to the full amount, the starting rate for savings decreases by £1 for every £1 of income above this threshold.
For example, a person with an annual income of £15,570 (£3,000 more than the Personal Allowance) is allowed to earn a maximum of £2,000 in tax-free interest with the starting rate for savings (£5,000 less £3,000).
The amount of savings interest you can earn before paying tax depends on your tax band. Basic-rate taxpayers can earn up to £1,000 in tax-free interest per tax-year, but the annual Personal Savings Allowance is halved to £500 for higher-rate taxpayers. Additional-rate taxpayers, meanwhile, can’t earn any interest on their savings without having to pay tax.
This means a basic-rate taxpayer might be able to put away up to £25,000 in a savings account paying 4.00% without worrying about being taxed on the interest earned (over the course of a year). This amount drops to £12,500 in the same account for higher-rate taxpayers.
However, it’s important to remember that the Personal Savings Allowance is shared by all interest earned from any savings accounts you hold (excluding ISAs).
Use Moneyfactscompare.co.uk’s Personal Savings Allowance calculator (above) to find out how much interest you could earn from your savings, how much tax you might owe and whether you’ll need to fill out a tax return.
Alternatively, use our monthly savings calculator to work out how much interest you might earn when making regular contributions to an account, or our lump sum savings calculator if putting away a single amount.
Note: Our tax calculator operates under several assumptions; while it provides an estimate of the amount of tax owed on your savings and whether you need to fill out a tax return, it doesn’t constitute financial advice and shouldn’t be relied upon.
HMRC might contact you under certain circumstances if you owe tax on your savings.
However, if you’re employed or get a pension, it can usually collect any tax owed automatically by estimating how much savings interest you’ll earn (based on the amount received in the previous tax-year) and adjusting your tax code accordingly. Nevertheless, you may still get a letter from HMRC if it later finds you’ve over or underpaid.
Meanwhile, those who complete Self Assessment tax returns must make sure to mention any savings interest they earn. If you don’t already complete tax returns, you’ll need to register for Self Assessment if you take home more than £10,000 a year from savings and investments. (Still not sure if you need to fill out a tax return? Check whether you need to register for Self Assessment via the Government website).
Otherwise, HMRC will tell you if you owe tax on your savings (and how to go about paying it) if you’re not employed, getting a pension and don’t have to complete a tax return.
Learn more with our guide on the Personal Savings Allowance and HMRC.
There are a handful of ways you could make the most of your Personal Savings Allowance, including:
Keeping a careful track of your interest
It’s important to carefully track how much interest you earn from any accounts covered by the Personal Savings Allowance to make sure you don’t accidentally exceed your tax-free limit. According to the Government website, the Personal Savings Allowance not only applies to interest earned from savings (including easy access accounts and fixed bonds), but other sources, including:
Making sure you’re earning a competitive return
If the amount of interest you earn each year is comfortably below your Personal Savings Allowance, you might find you’re able to take advantage of higher-paying savings accounts while staying within your tax-free limit.
Compare the best savings rates using our regularly updated charts and find out how making a switch could affect your tax liability using our calculator above.
Checking whether you’re eligible for the starting rate for savings
Millions of people with an annual income of £17,570 or less might not realise that they can earn up to £5,000 in tax-free interest each year with the starting rate for savings – on top of their Personal Savings Allowance.
Reviewing your tax band if your income changes
Whether you’ve received a pay rise, moved jobs or are now retired, it’s crucial to check how changes to your income affect your tax band. Going up the tax ladder will result in your Personal Savings Allowance being slashed, while a reduction to your income could mean you’re entitled to earn more interest without paying tax.
Remembering some savings accounts don’t count towards your Personal Savings Allowance
If it’s likely you’ll earn enough interest to breach your Personal Savings Allowance, it might be worth exploring savings accounts that offer tax-free returns – such as Individual Savings Accounts (ISAs). As of the 2026/27 tax-year, you can put away up to £20,000 in ISAs and won’t need to pay tax on any interest earned (although it should be noted that the amount under-65s can put away in cash ISAs is set to be lowered to £12,000 from 2027/28).
Any money won from Premium Bonds is also tax-free – however, unlike traditional savings accounts and ISAs, returns aren’t guaranteed.
There also some common mistakes that people make when it comes to their Personal Savings Allowance, such as:
Not knowing there’s a limit
Some people might not know there’s a limit to the amount of tax-free interest they can earn from their savings each year. By not being fully aware of your allowance, it might come as a shock if you were suddenly faced with a tax bill on your savings interest.
Thinking all savings are subject to tax
Conversely, some might incorrectly think that all their savings are subject to tax. However, this is not the case; only interest earned from savings that exceeds your Personal Savings Allowance will be taxed.
Believing that each account has its own allowance
All interest earned from any savings account you hold (excluding ISAs) counts towards your Personal Savings Allowance (i.e. each account doesn’t have its own, separate allowance). Therefore, it’s crucial to keep a careful track of how much interest you earn from each of your accounts to make sure it doesn’t exceed your allowance.
Forgetting about joint accounts
Savers should also remember that some of the interest earned from a joint account will count towards their individual Personal Savings Allowance. This is because interest from a joint account is split equally between the accountholders for the purposes of the Personal Savings Allowance.
Assuming ISAs count towards the allowance
Any interest earned from ISAs doesn’t count towards your Personal Savings Allowance and is automatically tax-free. This also applies to money won from Premium Bonds.
No, interest earned from ISAs is tax-free and doesn’t count towards your Personal Savings Allowance.
No, any money won from Premium Bonds is tax-free and doesn’t count towards your Personal Savings Allowance.
Savings interest is taxable if you earn enough to exceed your Personal Savings Allowance. A basic-rate taxpayer, for example, would need to pay tax on any interest above £1,000 per tax-year, while a higher-rate taxpayer would be taxed on interest over £500 per year.
Remember, additional-rate taxpayers don’t get a Personal Savings Allowance and must pay tax on all interest earned from their savings.
Savings providers report the amount of interest you earned to HMRC at the end of each tax-year, which is how it knows whether you need to pay tax.
The Personal Savings Allowance is shared by any accounts you may have; if you have multiple savings accounts, it’s important to keep a track of how much interest you earn from each to make sure you don’t exceed your tax-free limit.
Yes, joint accounts count towards your Personal Savings Allowance. Any interest earned from a joint account contributes in equal parts to each holder’s Personal Savings Allowance (regardless of how much money they added to the account and the size of their allowance).
In short, this means there isn’t a specific Personal Savings Allowance on joint accounts.
Yes, your Personal Savings Allowance can change if your annual income rises or falls by a big enough margin to alter your tax band.
Pension income doesn’t count towards your Personal Savings Allowance. However, it will be considered alongside any other taxable income streams to determine how much tax-free interest you can earn each year.
Yes, dividend income can affect your Personal Savings Allowance as it’s considered a taxable income which, depending on the amount you earn, could push you into a higher tax bracket and result in your allowance being cut.
If you exceed your Personal Savings Allowance, you’ll be charged tax on any interest over the threshold at your usual rate of Income Tax.
While married couples can’t technically combine their Personal Savings Allowances, they could split their savings in such a way to make the most of both allowances.
However, it should be noted that any money transferred to an account held in someone else’s name will be considered their property. If in doubt, seek advice.
Untaxed interest refers to any interest received from savings or investments which hasn’t had tax taken off.
The Personal Savings Allowance in Scotland is the same as in the rest of the UK. Although Scotland has its own Income Tax brackets, it uses the UK banding for the purposes of the Personal Savings Allowance.
Moneyfactscompare.co.uk is one of the UK’s longest-running financial comparison websites and each year helps millions of people find and compare savings accounts, cash ISAs and other products from a wide range of providers. Many of our comparison tables are updated throughout the working day, while our calculators, guides and Moneyfacts Star Ratings are designed to help consumers make more informed financial decisions.
On this page, you can get an estimate of how much tax you might owe on your savings and whether you’ll need to complete a tax return using our Personal Savings Allowance calculator (UK), before comparing savings accounts and ISAs which might suit your needs.
Alternatively, find out more about Moneyfactscompare.co.uk, our history and how we help consumers to compare financial products.
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Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.
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