Last updated: 11 October 2026 · Rates checked against: GOV.UK — Tax on savings interest
Reviewed by Zia Shahid, Buzdy Banking Editor · Our methodology
In this guide
UK banks do not deduct tax from your savings interest. They pay it to you in full and report the figure to HMRC. Whether you owe anything depends on an allowance — and on which tax band you are in.
Most people pay nothing on savings interest, because of the Personal Savings Allowance:
Basic rate taxpayer — £1,000 of interest tax-free
Higher rate taxpayer — £500
Additional rate taxpayer — £0
The allowance is per person, per tax year — not per account. It covers all your taxable savings interest added together.
The Personal Savings Allowance
| Your tax band | Allowance | Treatment |
|---|---|---|
| Basic rate | £1,000 | tax-free |
| Higher rate | £500 | tax-free |
| Additional rate | £0 | all taxable |
Interest above your allowance is taxed at your normal rate of income tax.
The starting rate for savings — an extra £5,000
On top of the allowance there is a starting rate for savings of £5,000, taxed at 0%. GOV.UK states that if your other taxable income — not counting savings interest or dividends — is less than £17,570, you can get it.
The starting rate reduces by £1 for every £1 of other income above the Personal Allowance of £12,570. So someone with a small pension or part-time earnings can receive a great deal of interest before paying anything.
How HMRC collects it
Banks and building societies pay interest gross — nothing is deducted at source — and report what they paid you to HMRC each year. Where tax is due, HMRC usually collects it by adjusting your tax code, so it comes out of wages or pension over the following year rather than as a bill.
This is why a UK saver can owe tax without ever having filled in a form, and why the first they hear of it is often a change to their tax code.
ISAs sit outside all of this
Interest inside a cash ISA is not taxable and does not use up your Personal Savings Allowance. For a saver close to their allowance, that is the practical difference between an ISA and an ordinary savings account.
Frequently asked questions
Is the allowance per account?
No. It is one allowance per person per tax year, covering all taxable savings interest combined.
Does my bank take the tax off?
No. UK banks pay interest gross and report it to HMRC. Any tax due is normally collected through your tax code.
Do I need to file a return just for savings interest?
Not usually — HMRC normally adjusts your tax code instead. If you already file a Self Assessment return, the interest goes on it.
What about joint accounts?
Interest on a joint account is normally treated as belonging half to each holder, so each uses their own allowance against their half.
Sources
This is information, not tax advice. The figures above were checked against the source named at the top of this page on 11 October 2026. Tax rules change, usually with each annual budget. For a decision about your own money, speak to a qualified tax adviser in your country.
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