If your taxable income for the 2026–27 tax year is less than £17,570, you will not pay any tax on the interest you receive. This figure combines the £5,000 starting rate for savings (taxed at 0%) with the £12,570 personal allowance.

In addition, the Personal Savings Allowance (PSA) provides further tax-free savings interest: basic-rate taxpayers can earn up to £1,000 in interest tax-free, while higher-rate taxpayers can earn up to £500. Those who pay the additional rate of tax on income over £125,140 are not eligible for the PSA. This means that a basic-rate taxpayer with no other income could receive up to £18,570 in tax-free interest.

It is important to understand that if your total non-savings income exceeds £17,570, you are no longer eligible for the starting savings rate. However, if your non-savings income falls between £12,570 and £17,570, the starting rate is reduced by £1 for every £1 your income exceeds your personal allowance.

Interest earned from ISAs or premium bond winnings is not included in these thresholds and remains tax-free. Those with higher savings in tax-free accounts can continue to benefit from their applicable PSA.

Banks and building societies no longer deduct tax from interest payments automatically. If you do owe tax on savings income, you must declare it through a self-assessment tax return.

If you have overpaid tax on your savings interest, you can submit a claim for a refund. Claims can be backdated up to four years from the end of the current tax year. For the 2022–23 tax year, the deadline to make a claim is 5 April 2027.

In the current tax year, anyone with taxable income of less than £16,850 will have no tax to pay on interest received. This figure is calculated by adding the £5,000 starting rate limit for savings (where 0% of the interest is taxable) to the current £11,850 personal allowance. However, it is important to note that if your total non-savings income exceeds £16,850 then the starting rate limit for savings is unavailable.

There is a tapered relief available if your non-savings income is between £16,850 and £11,850 whereby every £1 of non-savings income above a taxpayer’s personal allowance reduces their starting rate for savings by £1.

In addition to the starting rate for savings, there is also a Personal Savings Allowance (PSA) that was launched in April 2016. This allowance means that for basic-rate taxpayers, the first £1,000 interest on savings income is tax-free. For higher-rate taxpayers, the tax-free personal savings allowance is £500. Anyone earning over £150,000 will not benefit from the new PSA.

Interest from savings products such as ISA’s and premium bond wins do not count towards the limit. So, some taxpayers with tax-free accounts and higher savings can still continue to benefit from the relevant PSA limits. Banks and building societies no longer deduct tax from your account interest as a matter of course. Taxpayers who still need to pay tax on savings income need to declare this as part of their annual Self-Assessment tax return.

Taxpayers that have overpaid tax on savings interest can submit a claim to have the tax repaid. Claims can be backdated for up to four years after the end of the current tax year. This means that claims can still be made for overpaid interest dating back as far as the 2014-15 tax year. The deadline for making claims for the 2014-15 tax year is 5 April 2019.