Tax on savings interest from April 2027: 20% to 24%, and who pays nothing

What the April 2027 savings rates cost at each salary

Each row is one person whose salary is their only other income. The last column is what the rise would add a year to the tax in the column before it. A £15,000 row pays less than a £20,000 row on the same interest because of the starting rate, explained below.

Who pays nothing

The rise touches only interest above your allowances, and those allowances stay the same for 2027/28. HMRC estimates that around 12% of taxpayers will pay more because of it that year.

Interest in an ISA (an Individual Savings Account) and on some National Savings and Investments products is not usually taxed, so it uses none of the allowances and the rise does not reach it. The table counts interest outside an ISA only.

Three allowances can cover the rest in a tax year, which runs from 6 April to 5 April:

• Personal Allowance: the first £12,570 of income is free of tax. Any part your wages or pension leave unused can cover interest.
• Starting rate for savings: up to £5,000 of interest with no tax. It shrinks by one pound for each pound of other income above the Personal Allowance, so it has gone once other income reaches £17,570.
• Personal Savings Allowance: further interest with no tax. It is £1,000 if your total income, with the interest added, is no more than the higher-rate limit of £50,270. It is £500 above that, up to the additional-rate limit of £125,140, and nothing beyond it.

Why the £15,000 rows pay less

On £15,000, the first £12,570 uses up the Personal Allowance, and each pound of salary above it takes a pound off the £5,000 starting rate. What is left of the starting rate covers all of £2,000 of interest on its own, so the tax is nothing. With £5,000 of interest, that and the £1,000 allowance run out part way, and the remainder is taxed at 20%: £286 today. On £20,000 the starting rate has gone, so the same £5,000 leaves more to tax: £800 today.

How much saving it takes

The government's own sums assume an average interest rate of 4%. At that rate, someone on the basic rate, meaning total income with the interest stays at or under £50,270, would need over £25,000 outside an ISA before paying tax on interest. Above £50,270 the allowance falls to £500, as a later section shows. Someone with the whole starting rate as well, meaning other income no higher than the Personal Allowance, would need over £150,000. On the same sum, a higher-rate taxpayer's £500 allowance is used up by £12,500 at 4%. The balances move with the rate: an account paying more than 4% reaches the same interest on less.

What is law and what is only announced

The rates for the basic, higher and additional bands stand like this:

• Today, until 5 April 2027: 20%, 40% and 45%.
• In law for 2027/28: 22%, 42% and 47%, set by section 5 of the Finance Act 2026, which passed in March 2026.
• Announced for 2027/28: 24%, 44% and 49%, from the Budget of 28 October 2026. HMRC says the legislation will be introduced in Finance Bill 2026-27, so these rates are announced and not law.

Two points or four

HMRC's paper calls the Budget's change two points because it starts from the 22% in law; from today's 20% it is four. The table uses the announced rates, and on the rates in law its last column would be half what it shows.

The Budget's rates annex keeps the main Income Tax rates on wages and pensions at 20%, 40% and 45% for 2027/28, so this rise does not touch Income Tax on pay. Scotland sets its own rates on pay.

Interest can halve your allowance

Interest counts towards your total income, so it can carry you over the higher-rate limit when your salary alone does not. On £50,000 with £1,000 of interest, the total passes £50,270. The allowance drops from £1,000 to £500, and the other £500 of interest is taxed at the higher rate: £200 today and £220 from April 2027. On a salary low enough to keep the total at or under the limit, the same interest is fully covered and the tax is nothing.

Most of that bill exists already. The rise adds only £20 of it. On that same salary, interest up to £500 is still free of tax.

From a salary of £17,570 until salary plus interest passes £50,270, pay does not change the tax on interest

Once a salary reaches £17,570, the Personal Allowance is used and the starting rate has gone. A higher salary then makes no difference to the tax on a given amount of interest, as long as salary plus interest stays at or under £50,270. The £20,000 and £30,000 rows show it: £2,000 of interest pays £240 from April 2027 on either. Below £17,570 salary does matter, as the £15,000 rows show, and the tax can climb once the interest takes the total over £50,270.

The same holds again once the salary itself is above £50,270, with the smaller allowance. The £60,000 row would read the same on any salary until total income reaches £100,000.

The rates rise by the same amount in each band, from 20% to 24%, 40% to 44% and 45% to 49%, which is four pence on each pound of taxed interest. On the same interest, higher earners pay more extra only because less of it is covered. £130,000 with £500 of interest pays £20 extra, the same as £50,000 with £1,000, because each has £500 taxed. £20,000 with £5,000 pays £160 extra, twice the £80 on £130,000 with £2,000.

England, Wales, Northern Ireland and Scotland

The table holds in all four. HMRC says the savings rates apply across the UK, and GOV.UK says people in Scotland and Wales pay the same tax as the rest of the UK on savings interest.

Scotland's higher rate on wages started at £43,663 in 2026/27, but under the Income Tax Act 2007 the savings allowance follows the UK limit. So a Scottish taxpayer paying that rate on wages keeps the £1,000 allowance while total income, with the interest added, is at or under £50,270.

How the tax is collected

HMRC says people affected will not need to do anything differently and that reporting requirements do not change: the tax goes through existing Self Assessment or PAYE routes.

After each tax year, banks and building societies tell HMRC what interest they paid. HMRC adds your accounts together and splits a joint account's interest equally unless told otherwise. If you are employed or have a pension, and your interest is £10,000 or less, HMRC usually collects any tax through your tax code, which can also hold an estimate of the current year's interest. Where it cannot use a tax code, it may send a Simple Assessment letter saying how much is owed and how to pay. GOV.UK says someone in this group with tax to pay and no letter by 31 March of the following tax year has to contact HMRC. People who already send a Self Assessment return report the interest on it, and interest above £10,000 goes on a return.

What this table leaves out

• Total income from £100,000 to £125,140. There the Personal Allowance is withdrawn, so interest also raises the tax on salary, and no row covers it.
• Other income such as dividends or rent, which counts towards total income and can change the allowance.
• Foreign savings and children's accounts, which have different rules.

What these figures rest on

This post concerns the whole of the UK. The table uses 2026/27 and 2027/28 rates. The 2027/28 savings rates are announced and not yet law: Finance Bill 2026-27 has still to pass. The salary is taken as the only other income, and the interest as earned outside an ISA. Allowances apply in order: any Personal Allowance left, the starting rate for savings, then the Personal Savings Allowance, whose size depends on total income including the interest. A £0 means the allowances cover all of the interest. Savings interest is taxed on UK-wide rates and thresholds, so these figures are the same in Scotland. Figures are rounded to the nearest pound.

It is an estimate, not a statement of what your payslip will show, and it is not financial advice.