Tax on savings interest worked through every allowance in order — and, in reverse, the balance and the rate at which tax would start for you.
On £35,000 of income with £25,000 of savings at 4.5%, the year's interest is £1,125 and the tax on it is £25 — most of the interest sits inside the Personal Savings Allowance. The calculator below works your own figures through every allowance in the order HMRC applies them, and then answers the reverse questions most calculators skip: the balance at which tax would begin for you at your rate, and the rate at which your balance would start being taxed. The 4.5% is an example to overwrite; no rate on this page is a rate anyone is promising you.
Your income, your balance outside ISAs, and the rate your account actually pays. The rate shown is an example, not a recommendation.
The effective tax rate on £1,125 of interest, by other income: nothing at low incomes, rising to 45% at the top. At £49,145 of other income the line jumps by 8.9 percentage points: this interest starts pushing total income over the higher-rate threshold, and the Personal Savings Allowance halves. At £35,000 of other income, the effective rate on this interest is 2.2%.
Of the £1,125.00 of interest, £1,000.00 is covered by your allowances — unused Personal Allowance first, then the starting rate for savings, then the Personal Savings Allowance — leaving £125.00 taxable and £25.00 of tax.
Scottish taxpayers: savings interest is taxed on the UK bands and thresholds for the whole of the UK, so these figures apply unchanged whatever rate your salary pays.
The rate here is yours to set, not a market rate. A planning estimate, not financial advice.
| Tax/source year | 2026/27 |
|---|---|
| Region | UK-wide: savings interest is taxed on the UK bands and thresholds in every UK nation, including for Scottish taxpayers |
| Account rates | Never assumed. Any interest rate in a savings calculation is an input you set, stated beside the result. |
| Your other income | Wages and pension income decide how much Personal Allowance and starting rate are left for interest, and which Personal Savings Allowance band applies. |
|---|---|
| The interest itself | Interest counts towards the income that sets your band, so a large interest year can shrink the allowance that was meant to cover it. |
| The account's wrapper | The same balance at the same rate is taxed outside an ISA and untouched inside one; the wrapper, not the rate, decides whether the allowances are needed. |
| What is not decided here | PayBreakdown does not decide payroll correctness, lender approval, benefit entitlement or employer compliance, and does not give regulated financial, mortgage, debt, tax, payroll or legal advice. |
|---|
Interest uses any Personal Allowance your income has left unused, then the starting rate for savings if your other income is low enough, then the Personal Savings Allowance for your band — and only interest left after all three is taxed. The savings hub explains each allowance in full; this page runs them. Two consequences are worth knowing before you read your own result. First, the order is fixed in your favour, so no choice on a tax return changes it. Second, the interest itself counts towards the income that sets your band — which creates the cliff below.
The Personal Savings Allowance is tested on total income including the interest. Cross the UK higher-rate threshold and the allowance halves — so a pound of interest can cost far more than a pound of allowance. A worked example from the engine behind this page: £50,000 of income with £20,000 at 4% earns £800 of interest, pushing total income £530 over the £50,270 threshold. That halves the allowance from £1,000 to £500, and the tax due becomes £120. A pension contribution of £530 taken before tax — net pay or salary sacrifice — holds total income at the threshold and cuts the tax on that interest by £120. The chart above draws this: the effective rate on your interest, by income, with the jump where the allowance halves.
Scottish income tax rates apply to wages, pension and most other taxable income — but GOV.UK's rule for savings interest is that you pay the same tax on it as the rest of the UK. The rates charged on interest and the thresholds that set the Personal Savings Allowance both follow the UK bands, so every figure this calculator prints applies unchanged to a Scottish taxpayer, whatever rate their salary pays. Many calculators apply Scottish bands to interest; that is wrong, and the engine here holds the correct rule under a permanent test.
Three honest limits. Joint accounts are not modelled: HMRC's normal treatment splits a joint account's interest equally between the holders, so run each half separately. How the tax is collected is not modelled: if you are employed or receive a pension, HMRC usually adjusts your tax code, working from an estimate based on last year's interest. And Self Assessment mechanics are not modelled: if you file a return, the interest goes on it and the calculation happens there. Relief-at-source pension contributions are also outside this page — they extend the basic-rate band rather than reducing income, and the income field here expects income after pension taken before tax.
Change any figure above and the result moves with it. A payslip can differ from any calculator because payroll works pay period by pay period, so a tax-code change, a bonus, arrears or a refund can land in one month and not the next. See how each deduction is worked out.
Because your income decides which allowances your interest gets. It sets how much Personal Allowance is left, whether any starting rate for savings survives the taper, and which Personal Savings Allowance band you sit in — and the interest itself is part of the income that sets the band. Two people with identical savings can owe very different tax.
It is your tax-free headroom turned into a balance: at your income and your rate, the balance at which the year's interest exactly uses up your allowances. Below it, no tax; above it, tax starts on the excess. It is solved against the full engine, so it stays correct even where the interest itself would tip you over a threshold.
The engine tests the Personal Savings Allowance on total income throughout, including above the Personal Allowance taper — the additional-rate band, where the allowance is nothing at all, is visible as the chart's final plateau. For what the taper does to the tax on your salary itself, the tax trap calculator covers that side.
Last updated 2026-08-28. Checked by Sean Elsmore. Rates last checked against GOV.UK on 2026-08-07. Estimates are for planning and should be checked against official records where the decision matters.