Personal Savings Allowance Guide
Understand how much interest you can earn tax-free in the UK, how the allowance changes by tax band, and how it fits alongside ISAs and the starting rate for savings.
How the Personal Savings Allowance Works
Since 2016, most people in the UK no longer pay tax on savings interest automatically. Instead, banks and building societies pay interest gross, and your Personal Savings Allowance determines how much of that interest stays completely tax-free.
Work Out Your Tax Band
Your Personal Savings Allowance depends on which Income Tax band you fall into: basic rate, higher rate, or additional rate. This is based on your total taxable income for the year, including wages, pensions, and other earnings — not just your savings interest.
Check Your Allowance Amount
Basic rate taxpayers get a £1,000 tax-free allowance for savings interest. Higher rate taxpayers get £500. Additional rate taxpayers do not receive a Personal Savings Allowance at all, meaning all of their savings interest is taxable.
Add Up All Your Interest
The allowance covers interest from savings accounts, current accounts, credit union accounts, and most types of bonds. It does not include interest earned inside an ISA, which is always tax-free regardless of the amount.
Pay Tax On Anything Above The Allowance
If your interest exceeds your allowance, the excess is taxed at your marginal rate. HMRC usually collects this automatically through a change to your tax code, so most people never need to file anything separately.
Allowance Quick Facts
Essential insights into UK savings interest tax
Allowance By Tax Band
A quick overview of how much tax-free savings interest each type of taxpayer can receive.
| Tax Band | Taxable Income Range | Personal Savings Allowance | Tax On Interest Above Allowance |
|---|---|---|---|
| Starting Rate for Savings | Total income up to £17,570 (varies with other income) | Up to £5,000 (in addition to the PSA) | 0% within this band. |
| Basic Rate | £12,571 – £50,270 | £1,000 | 20% on interest above the allowance. |
| Higher Rate | £50,271 – £125,140 | £500 | 40% on interest above the allowance. |
| Additional Rate | Over £125,140 | £0 (no allowance) | 45% on all savings interest. |
Personal Savings Allowance FAQ
Answers to the most frequently asked questions about the UK Personal Savings Allowance.
Basic rate taxpayers can earn up to £1,000 in savings interest tax-free each year. Higher rate taxpayers get a £500 allowance. Additional rate taxpayers do not receive a Personal Savings Allowance at all.
No. The Personal Savings Allowance is separate from your personal allowance. It sits on top of the amount you can already earn tax-free, and it applies specifically to interest earned on savings, not to wages or other income.
The starting rate for savings lets people with low earnings from other income receive up to £5,000 of savings interest tax-free, on top of their Personal Savings Allowance. This rate reduces by £1 for every £1 of other income above the personal allowance, and disappears once other income reaches the threshold.
No. Interest earned inside an Individual Savings Account (ISA) is always tax-free and does not count towards your Personal Savings Allowance, regardless of how much interest you earn or which tax band you are in.
Banks and building societies report interest paid to customers directly to HMRC each year. If your interest exceeds your Personal Savings Allowance, HMRC usually collects the tax owed automatically by adjusting your tax code, rather than requiring a separate payment.