Personal Savings Allowance explained
For the 2026/27 tax year · checked 22 Sep 2026 against GOV.UK
The Personal Savings Allowance lets you earn some interest each year without paying tax: £1,000 if you're a basic-rate taxpayer, £500 if you're higher rate, and nothing if you're additional rate.
How much is my allowance?
It depends on your tax band, which depends on your total income for the year, including the interest itself.
| Your tax band | Total income (2026/27) | Tax-free interest |
|---|---|---|
| Basic rate | up to £50,270 | £1,000 |
| Higher rate | £50,271 to £125,140 | £500 |
| Additional rate | over £125,140 | £0 |
Worked examples
| Salary and interest | Allowance | Tax on interest |
|---|---|---|
| £30,000 salary, £1,000 interest | £1,000 | £0 |
| £30,000 salary, £1,800 interest | £1,000 | £160 |
| £70,000 salary, £1,800 interest | £500 | £520 |
Interest above the allowance is taxed at your usual rate: 20%, 40% or 45%. In the second example, £800 is taxed at 20%. In the third, £1,300 is taxed at 40%.
Try it with your own figuresThe trap near £50,270
Because interest counts towards your income, it can push you into the higher-rate band and cut your allowance from £1,000 to £500. Someone earning £49,000 with £2,000 of interest has a total income of £51,000. That makes them a higher-rate taxpayer, so they get a £500 allowance and pay £446 on their interest, not the £200 they might expect.
What doesn't count
- Interest from Cash ISAs is tax-free and doesn't use up your allowance.
- Premium Bonds prizes are tax-free.
- If your other income is under £17,570, you may also get the £5,000 starting rate for savings on top.
How the tax is collected
Banks pay interest without taking tax off, then report it to HMRC. If you go over your allowance, HMRC usually collects the tax through your tax code or sends a Simple Assessment bill. If your interest is over £10,000, or you already file Self Assessment, put it on your tax return.
Source: GOV.UK: tax on savings interest.