Savings Interest Tax Calculator

Calculate how much tax you’ll pay on savings interest in the UK for 2025/26. Includes Personal Savings Allowance.

2025/26 Tax Year: Personal Savings Allowance: £1,000 (basic rate), £500 (higher rate), £0 (additional rate). Tax rates: 20%, 40%, 45%.
Personal Savings Allowance£0.00
Taxable Interest£0.00
Tax Owed£0.00

Tax Breakdown

ItemAmountRateDetails

Enter your savings interest and income band to calculate tax owed.

Savings Interest Tax Calculator UK 2025/26

Use our free Savings Interest Tax Calculator to work out how much tax you’ll owe on interest from savings accounts, bonds, and cash ISAs in the UK. This tool applies your Personal Savings Allowance (PSA) and calculates your tax liability for the 2025/26 tax year.

What is the Personal Savings Allowance?

The Personal Savings Allowance (PSA) lets most UK taxpayers earn a certain amount of savings interest each year without paying tax. The amount you can earn tax-free depends on your income tax band:

Tax Band Annual Income Range Personal Savings Allowance
Basic Rate £12,571 – £50,270 £1,000
Higher Rate £50,271 – £125,140 £500
Additional Rate Over £125,140 £0

Note: Your income for PSA purposes includes your salary, pensions, rental income, dividends, and other sources — but excludes the first £500 of trading income for self-employed individuals and the Personal Allowance (£12,570).

Savings Interest Tax Rates 2025/26

Savings interest above your Personal Savings Allowance is taxed at your marginal income tax rate:

Tax Band Tax Rate on Savings Interest
Basic Rate 20%
Higher Rate 40%
Additional Rate 45%

If your income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 over £100,000. This can push you into the higher or additional tax band, reducing your PSA accordingly.

How the Calculator Works

  1. Enter total savings interest: Sum of interest from all your savings accounts, bonds, and non-ISA savings over the tax year
  2. Select your tax band: Based on your total annual income (salary + pension + other sources)
  3. Apply PSA: Subtract your allowance (£1,000, £500, or £0) from total interest
  4. Calculate tax: Multiply taxable interest by your marginal rate (20%, 40%, or 45%)

The result shows exactly how much you owe to HMRC on your savings interest after accounting for your tax-free allowance.

What Counts as Savings Interest?

Savings interest comes from various sources, all treated the same way for tax purposes:

  • Bank current account interest
  • Savings accounts and easy-access accounts
  • Fixed-term bonds and certificates of deposit
  • National Savings & Investments (NS&I) products
  • Peer-to-peer lending interest (unless reported separately)
  • Bond interest from UK corporations
  • Interest from overseas savings accounts (subject to foreign income rules)

What doesn’t count: Cash ISA interest is tax-free and doesn’t need reporting. Premium Bond prizes are also tax-free. Dividend income is separate and has its own £500 allowance.

Do I Need to Report Savings Interest?

In most cases, banks report interest directly to HMRC, and tax is collected through your PAYE code. You typically don’t need to report savings interest if:

  • Your total interest is under £10,000 and you’re already filing Self Assessment anyway
  • You pay tax through PAYE and your interest is covered by your PSA

You must report savings interest if:

  • You’re not employed or self-assessed and interest exceeds your PSA
  • Your total untaxed income (including interest) is over £2,500
  • You receive dividends or rental income requiring Self Assessment
  • Your interest is over £10,000 (even with PSA)

Saving Strategies to Reduce Tax

Use Cash ISAs

Cash ISA interest is completely tax-free, regardless of your tax band or how much you earn. For 2025/26, the ISA allowance is £20,000 — you can shelter up to this amount in interest-bearing ISAs with zero tax liability. If you’re a higher or additional rate taxpayer, maximise your ISA allowance first before going into taxable accounts.

Split savings with spouse/civil partner

If one partner is a basic rate taxpayer and the other is higher/additional rate, transfer savings to the lower-rate partner to maximise combined PSAs. A couple where both are basic rate taxpayers can shelter £2,000 in interest tax-free (£1,000 each), versus just £500 if one partner earns nothing and the other is higher rate.

Consider tax-efficient investments

Stocks and Shares ISAs allow unlimited growth free from income and capital gains tax. Innovative Finance ISAs let you lend through peer-to-peer platforms with tax-free interest. Premium Bonds offer tax-free prize winnings instead of interest — ideal for high-rate taxpayers who don’t mind variable returns.

Check if starting rate for savings applies

If your other income is very low (below £17,570 in 2025/26), you may qualify for the starting rate for savings of 0% on up to £5,000. This is in addition to your PSA and applies when your income minus Personal Allowance leaves room within the starting rate band. Useful for part-time workers, retirees, or people on low income.

Worked Examples

Basic rate taxpayer with £1,500 interest

Income: £35,000 (basic rate band). Savings interest: £1,500. PSA: £1,000. Taxable interest: £500. Tax due: £500 × 20% = £100.

Higher rate taxpayer with £2,000 interest

Income: £75,000 (higher rate band). Savings interest: £2,000. PSA: £500. Taxable interest: £1,500. Tax due: £1,500 × 40% = £600.

Additional rate taxpayer with £800 interest

Income: £150,000 (additional rate band). Savings interest: £800. PSA: £0. Taxable interest: £800. Tax due: £800 × 45% = £360.

Non-taxpayer with £500 interest

Income: £10,000 (below Personal Allowance). Savings interest: £500. PSA: £1,000 (you retain the full PSA even if you’re a non-taxpayer). Taxable interest: £0 (fully covered by PSA). Tax due: £0.

Frequently Asked Questions

Do I pay tax on ISA interest?

No. Interest earned in a Cash ISA or Stocks and Shares ISA is completely tax-free and doesn’t count towards your Personal Savings Allowance. You can earn unlimited ISA interest without any tax liability, as long as you stay within the annual ISA allowance (£20,000 for 2025/26).

What is the starting rate for savings?

The starting rate for savings is 0% on up to £5,000 of savings income. You qualify if your other income (non-savings) is below £17,570. The amount you can earn at the starting rate reduces by £1 for every £1 of other income above £12,570. So if your other income is £15,000, you’d have £2,570 at the 0% starting rate plus your regular PSA.

How does HMRC know my savings interest?

UK banks and building societies report interest paid to HMRC through their banking returns. HMRC matches this data against your Self Assessment return (if filed) and your PAYE records. If there’s a discrepancy, you may receive a letter asking you to clarify or pay tax owed. Overseas accounts are reported under automatic exchange of information agreements.

Can I carry forward unused PSA to next year?

No. The Personal Savings Allowance resets every tax year (6 April to 5 April). Any unused allowance from the current year is lost — it cannot be transferred to another person or carried forward. This makes it worth using your full allowance each year if you’re earning interest close to the threshold.

What happens if I don’t report taxable savings interest?

HMRC receives data from banks on all interest paid. If you fail to report taxable interest, you may face penalties ranging from informal letters to formal assessments plus interest. Penalties can be 30%-100% of the tax owed depending on whether the failure was careless or deliberate. If you’ve forgotten to report previous years, use HMRC’s voluntary disclosure service to correct errors and minimise penalties.

Does the PSA apply to dividend income?

No. The PSA only applies to savings interest. Dividends have a separate Dividend Allowance (£500 for 2025/26) and different tax rates (8.75%, 33.75%, 39.35%). You can use both allowances simultaneously — for example, a basic rate taxpayer could earn £1,000 in interest tax-free AND £500 in dividends tax-free.

How are premium bonds taxed?

Premium Bond prizes are completely tax-free, regardless of the amount won. Unlike interest, there’s no guarantee of returns — you might win nothing in a given month or hit a large jackpot. Premium Bonds are especially attractive to higher and additional rate taxpayers who would otherwise pay 40%-45% tax on equivalent savings interest.

Does NS&I Premium Bonds count towards my allowance?

No. NS&I Premium Bond prizes are tax-free and don’t use any part of your Personal Savings Allowance. Other NS&I products like Index-linked Savings Certificates and Direct Saver accounts pay taxable interest that does count towards your PSA.

What if my income pushes me into a higher tax band?

Your tax band is determined by your total taxable income including savings interest. If earning interest pushes you from basic to higher rate, your PSA drops from £1,000 to £500, and interest above the allowance is taxed at 40% instead of 20%. Be cautious about topping up savings near the £50,270 threshold — the effective tax rate on that marginal pound can exceed 60% when combining income tax, National Insurance, and PSA reduction.

Are there differences for Scottish taxpayers?

Yes. Scottish taxpayers have different income tax bands (Starter 19%, Basic 20%, Intermediate 21%, Higher 42%, Advanced 47%), which affect your marginal rate on savings interest. However, the Personal Savings Allowance amounts (£1,000/£500/£0) remain the same across the UK. The calculator can be adjusted for Scottish bands — contact us for a Scottish-specific version.

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