How much savings interest can I earn tax-free?

Basic-rate taxpayers can earn £1,000 of interest tax-free through the Personal Savings Allowance; higher-rate taxpayers get £500. Additional-rate taxpayers get no allowance. Lower earners may also get up to £5,000 through the starting rate for savings.

Do I pay tax on cash ISA interest?

No. Interest earned inside a cash ISA is completely tax-free and does not count towards your Personal Savings Allowance. The ISA allowance for the current tax year is £20,000 per person.

How does HMRC collect tax on savings interest?

Banks and building societies report interest to HMRC automatically. If you are employed or receive a pension, HMRC usually adjusts your tax code. If you complete Self Assessment, you declare the interest yourself.

Will I Pay Tax on My Savings Interest?

Enter your balance, interest rate, and Income Tax band to see exactly how much of your interest HMRC will take — and how much the Personal Savings Allowance and starting rate for savings shield for you. Rules are for 2026/27.

Taxable savings balance

Interest rate (AER) — 4.50%

0%6%

Your Income Tax band

Basic rate (20%)Higher rate (40%)Additional rate (45%)

Other income (wages/pension) — £50,000

Used to work out your starting rate for savings. Below £17,570 unlocks up to £5,000 extra tax-free interest.

Interest earned£900.00£20,000 at 4.50% AER

Tax owed£0.0020% on £0.00 of taxable interest

Tax-free allowance£1,000PSA £1,000

Effective tax on interest0.0%You keep £900.00 after tax

You pay no tax on your savings interest this year. Your interest sits inside your allowances. This assumes your interest does not push you into a higher tax band. Figures for the 2026/27 tax year.

How the allowances stack up

Most UK savers pay no tax on interest because of two allowances. The Personal Savings Allowance gives £1,000 of tax-free interest to basic-rate taxpayers and £500 to higher-rate taxpayers (additional-rate taxpayers get none). The starting rate for savings adds up to £5,000 more for people whose non-savings income is below £17,570 a year.

Your tax band matters more than your balance. A basic-rate taxpayer can earn roughly £22,200 of interest at today's 4.5% easy-access rate before breaching the £1,000 PSA. A higher-rate taxpayer breaches the £500 PSA at just over £11,000. That is the gap that makes a cash ISA, which is completely tax-free, disproportionately valuable for higher earners.

The numbers change fast — check your band every April

The allowances are set per tax year, and your tax band is determined by your total income including interest. If your interest itself tips you into the higher-rate band, your PSA shrinks from £1,000 to £500 for the portion above the threshold. Re-run this calculator whenever your balance, rate, or salary changes — especially at the start of a new tax year on 6 April.

Related tools and guides

This calculator is for illustrative purposes only and does not constitute financial or tax advice. It uses standard HMRC allowances for 2026/27 and assumes your interest does not push you into a higher tax band. Your actual tax position depends on your individual circumstances. You should seek independent financial advice before making tax-related decisions. GiltEdge is not regulated by the FCA.