Savings Interest Tax Calculator UK 2025/26
Find out how much tax you owe on your savings interest after your Personal Savings Allowance — with ISA comparison and starting rate check.
How the Personal Savings Allowance Works in 2025/26
The Personal Savings Allowance (PSA) was introduced in April 2016 and gives most UK savers a tax-free interest allowance each year. Your allowance depends on your income tax band.
| Tax Band | Annual Income | PSA 2025/26 |
|---|---|---|
| Basic rate taxpayer | Up to £50,270 | £1,000 |
| Higher rate taxpayer | £50,271 to £125,140 | £500 |
| Additional rate taxpayer | Over £125,140 | £0 |
Only interest above the PSA is taxable, and it is taxed at your marginal income tax rate — 20%, 40% or 45% depending on your band.
The Starting Rate for Savings
If your non-savings income (salary, self-employment, pension) is low enough, you may also qualify for the starting rate for savings — a 0% tax rate on up to £5,000 of savings interest. This is separate from and additional to the PSA.
The starting rate applies only where non-savings income is below £17,570 (the personal allowance of £12,570 plus £5,000). For every £1 of non-savings income above £12,570, the starting rate band reduces by £1. This means low earners and retirees living largely on savings can potentially earn up to £6,000 in savings interest completely tax-free in 2025/26.
What Rate Do You Pay on Interest Above the PSA?
| Your Tax Band | Rate on Interest Above PSA |
|---|---|
| Basic rate | 20% |
| Higher rate | 40% |
| Additional rate | 45% |
ISA Interest Is Always Tax-Free
Interest earned inside a Cash ISA, Stocks and Shares ISA, Lifetime ISA or Innovative Finance ISA is completely exempt from income tax. It does not count towards your PSA and does not appear on your tax return. The annual ISA allowance remains at £20,000 per person for 2025/26.
How HMRC Collects Tax on Savings Interest
If you are employed or receive a pension, HMRC usually adjusts your PAYE tax code to collect any tax owed on savings interest automatically. Your bank reports interest paid to HMRC at the end of each tax year. If you complete a Self Assessment return, you must declare all savings interest received — including amounts within the PSA — and HMRC calculates whether any tax is owed.
Tips to Reduce Tax on Savings Interest
The most straightforward approach is to use your annual ISA allowance. Beyond that, couples can consider holding savings in the name of the partner with the lower income or the larger PSA. Making pension contributions can also reduce your adjusted net income, potentially moving you from higher rate to basic rate and doubling your PSA from £500 to £1,000 while reducing the tax rate on interest from 40% to 20%.
