Savings tax bands 2026/27
The starting rate for savings is £5,000 at 0%, reduced by £1 for every £1 of non-savings income above the personal allowance. The Personal Savings Allowance for 2026/27 is £1,000 (basic-rate), £500 (higher-rate) or £0 (additional-rate)7.
How savings income is taxed
Interest within the starting-rate band, the PSA, or the personal allowance is tax-free. Beyond that, savings interest is taxed at the saver's marginal income-tax rate. ISA interest is exempt and does not use any allowance7.
Worked example
A pensioner with £15,000 pension income and £4,000 of bank interest is a basic-rate payer. After the £12,570 personal allowance, £2,430 of pension uses basic-rate band. The starting-rate band remaining is £5,000 − £2,430 = £2,570, plus £1,000 PSA. £3,570 of the interest is tax-free; £430 is taxed at 20% = £86.
HMRC and bank reporting
Banks report interest paid to HMRC. PAYE codes are adjusted in arrears for non-self-assessment savers. Self-assessment savers declare on their return.