Interactive Savings Interest Tax Calculator
Enter your annual non-savings income and annual savings interest for 2025/26. This tool estimates how much of your interest is covered by the 0% starting-rate band and Personal Savings Allowance, then calculates estimated tax at 20%, 40%, and 45% where applicable. It is designed for speed and planning, so you can test different scenarios in seconds.
Estimated tax summary
| Estimated taxpayer band | - |
|---|---|
| Starting-rate band available (0%) | - |
| Interest covered by starting-rate band | - |
| Personal Savings Allowance | - |
| Interest covered by PSA | - |
| Interest taxed at 20% | - |
| Interest taxed at 40% | - |
| Interest taxed at 45% | - |
| Total estimated tax on interest | - |
Enter your figures and press calculate.
How UK Savings Interest Tax Works in 2025/26
The UK system for taxing interest is layered. First, HMRC looks at your income profile and works out what tax-free or 0% capacity applies before standard tax rates are charged. The layers that matter for most people are the personal allowance, the starting rate for savings, and the Personal Savings Allowance. If any interest is left after those layers, that remainder is taxed using the rates linked to your tax band. When you understand these layers, savings tax stops feeling random and starts feeling predictable.
Personal Savings Allowance 2025/26 is straightforward in headline terms, but often misunderstood in practice. Basic-rate taxpayers can receive up to £1000 of savings interest at 0%. Higher-rate taxpayers get £500. Additional-rate taxpayers get £0. People frequently assume these amounts are extra tax-free income on top of every other rule, but the actual amount of interest taxed at 0% can be affected by how much non-savings income you have and whether you can use the starting-rate band.
The starting rate for savings is a separate 0% band that can be very valuable for people with modest non-savings income. Starting rate for savings: 0% on up to £5000 if income below £17570. The mechanics are critical: non-savings income above £12570 erodes starting rate £1 for £1. That means the starting-rate band drops gradually as non-savings income rises from £12,570 to £17,570, and becomes zero once non-savings income reaches or exceeds £17,570.
Example: income £15000, starting rate band £5000-£2430=£2570 remaining at 0%. This one line captures the erosion formula many taxpayers miss. The income amount above £12,570 is £2,430, so the starting-rate band is reduced from £5,000 to £2,570. If savings interest is less than or equal to £2,570, that part can sit at 0% under the starting-rate rule before the Personal Savings Allowance is even considered.
After the starting-rate layer and PSA layer are used, any remaining interest is taxed by marginal rate band. For many households that means 20%, but for higher income levels the extra interest can land at 40% or 45%. Even a small increase in savings rates can push interest above the 0% limits, so checking your estimated position before tax-year end is now part of good household cash planning.
Rules Table for Fast Reference
| Rule | 2025/26 value | What it means in practice |
|---|---|---|
| Personal Allowance (baseline) | £12,570 | Used as the main reference point for starting-rate erosion in this guide. |
| Starting-rate maximum for savings | £5,000 at 0% | Available when non-savings income is low; reduced £1 for each £1 above £12,570. |
| Starting-rate fully exhausted | £17,570 non-savings income | At or above this level, starting-rate band for savings is normally £0. |
| PSA for basic-rate taxpayer | £1,000 at 0% | Available after any starting-rate use, then tax applies on remaining interest. |
| PSA for higher-rate taxpayer | £500 at 0% | Half of the basic-rate PSA, so savings tax can appear earlier. |
| PSA for additional-rate taxpayer | £0 | No PSA, so taxable interest can be charged sooner at higher rates. |
| Bank reporting | Automatic to HMRC | Banks report interest details directly; HMRC can update PAYE coding or request return filing. |
Because these rules overlap, two people earning the same amount of interest can pay very different tax. One may still have starting-rate and PSA capacity, while another has already used both and pays full marginal rates. The calculator above handles this sequence in order, which is why it is more useful than applying one flat percentage to your annual interest.
Step-by-Step Method Behind the Calculator
The tool follows a practical seven-step path. Step one records your non-savings income and savings interest. Step two estimates taxpayer band from total income, then selects PSA as £1000, £500, or £0. Step three calculates how much non-savings income sits above £12,570. Step four reduces the £5,000 starting-rate band pound-for-pound by that excess. Step five applies any remaining starting-rate capacity to savings interest. Step six applies PSA to the remaining interest. Step seven taxes any final remainder at 20%, 40%, and 45% according to available tax bands.
This layered method mirrors the way planning conversations happen with accountants and advisers: start with what is definitely 0%, then test what is left. It also makes scenario planning easier. You can model a pay rise, pension change, or rate increase on savings accounts and immediately see whether your tax position shifts from no tax to some tax, or from 20% into 40% territory for part of the interest.
The output table is intentionally transparent. Instead of only giving one number, it shows how much interest lands in each layer: starting-rate 0%, PSA 0%, then taxed slices. If your tax appears higher than expected, the line items usually reveal why. In many cases, the issue is not the interest itself but a change in non-savings income that reduced your 0% capacity.
Banks Report Interest to HMRC Automatically
Banks and building societies report interest information to HMRC automatically. This matters because many people still expect an annual paper certificate to drive tax changes. Digital reporting means HMRC can use account data to adjust your PAYE code or compare reported interest against what appears in your tax return. You still need your own records, but you should assume HMRC will receive account-level interest information and reconcile it.
Automatic reporting does not always mean your tax is collected perfectly in real time. Timing differences can occur when accounts pay annual interest late in the year, when you change jobs, or when your code is updated after payments have already been made. That is why it is sensible to run a quick estimate before year-end and again after interest posts, especially if your total interest is near the PSA boundary.
Where PAYE can collect the right amount smoothly, HMRC may simply adjust your code. Where that is not possible, additional action can be required. Self-assessment if interest over PSA is a sensible working rule when PAYE has not settled everything. If you are already in Self Assessment for any reason, include savings interest details in your return so the final calculation is complete.
When Self Assessment Is Usually Needed
Many people ask whether they must always file a return when savings interest exceeds PSA. In practice, HMRC sometimes collects the extra tax through coding adjustments, but not always. A practical approach is this: if your interest is over PSA and you have reason to believe coding has not fully captured it, use Self Assessment to avoid underpayment surprises. The same applies when your income mix is complex, when several providers paid interest, or when there were mid-year changes affecting how much 0% capacity you had.
Filing can also help create certainty. If you are close to thresholds, proactive reporting prevents rolling corrections that can appear over more than one tax year. The return gives one clear place to report your totals and settle the calculation. That often reduces future coding volatility, especially for people with fluctuating savings balances or short-term fixed-rate accounts that mature with a large annual payment.
Keep simple records: provider name, account type, gross interest, and payment date. If you transfer money between accounts, keep maturity statements because year-end interest can arrive from accounts you no longer actively use. Clean records make reconciliation easy if HMRC asks follow-up questions or if provider totals differ from what you expected due to payment timing.
ISA as a Practical Solution to Limit Future Savings Tax
For households building emergency funds, a Cash ISA is often the easiest long-term way to reduce savings-tax friction. Interest in a Cash ISA is normally tax-free, so it does not consume PSA or interact with the starting-rate calculation in the same way taxable accounts do. If your annual interest has started to exceed PSA because rates rose, moving part of your cash strategy into ISAs can stabilise your tax outcome each year.
An ISA does not always deliver the top headline rate on every date, so compare net outcomes rather than headline percentages. If a taxable account pays slightly more but pushes part of your interest into 20% or 40% tax, the after-tax return may be lower than a tax-free ISA rate. The right choice depends on both rates and your personal tax position, not rate tables alone.
Practical planning tip: review expected interest in the final quarter of the tax year, then decide whether new contributions should go to taxable savings or ISA wrappers. A small adjustment in where you park cash can prevent crossing a threshold that triggers avoidable tax paperwork and unexpected liabilities.
Worked Examples for Common UK Scenarios
Scenario 1: Non-savings income £15,000, savings interest £4,000
Non-savings income above £12,570 is £2,430. Starting-rate band becomes £5,000 - £2,430 = £2,570. The first £2,570 of interest sits at 0% under starting-rate rules. Remaining interest is £1,430. If taxpayer status remains basic-rate, PSA is £1,000, leaving £430 taxable at 20%. Estimated tax on interest is £86. This is the exact style of case where people wrongly assume all £4,000 is tax-free, but one small remainder still gets taxed.
Scenario 2: Non-savings income £12,000, savings interest £6,000
Because non-savings income is below £12,570, full starting-rate capacity of £5,000 is available. Interest left after starting-rate is £1,000. Basic-rate PSA of £1,000 then covers the rest, so estimated tax is £0. This is a strong example of how the two 0% layers can combine. The starting-rate and PSA are separate and can stack in the same year when income profile allows.
Scenario 3: Non-savings income £30,000, savings interest £2,200
Starting-rate is usually exhausted because non-savings income is above £17,570. For a basic-rate taxpayer, PSA is £1,000, so £1,200 remains taxable at 20%. Estimated tax is £240. People in this range often see their first meaningful savings-tax charge when rates on easy-access accounts rise and total interest crosses four digits.
Scenario 4: Non-savings income £65,000, savings interest £2,500
Higher-rate taxpayer status typically means PSA is £500. Starting-rate is not available at this income level. Remaining taxable interest is £2,000. Depending on how much higher-rate band is already used by other income, most or all of that £2,000 may be taxed at 40%. Estimated tax can be around £800 if the full amount sits in the higher-rate slice.
Scenario 5: Non-savings income £130,000, savings interest £2,000
Additional-rate taxpayer status gives PSA £0. Starting-rate is also unavailable. The interest can be fully taxable, often at 45% for this income profile. Estimated tax could be £900 on £2,000 interest. This is why high earners frequently prioritise ISA usage for cash reserves to avoid annual friction and preserve net returns.
Scenario 6: Two-earner household planning
If one partner is basic-rate with unused PSA and the other is higher-rate with a smaller PSA, account ownership can affect household after-tax interest. The tax system applies per individual, not per household pot. Legal ownership and beneficial entitlement matter, so planning should align with account terms and real ownership, not just a spreadsheet target. Done properly, this can reduce family-level tax without changing total savings.
Common Mistakes to Avoid
One frequent error is using only PSA and ignoring the starting-rate rules. Another is the reverse: assuming everyone can use a full £5,000 starting-rate band regardless of salary. A third mistake is forgetting that taxpayer band can change after adding all income sources, which can reduce PSA from £1,000 to £500 or to £0. A fourth is not consolidating interest across all providers before estimating tax; small balances in multiple accounts can add up quickly.
Timing creates its own mistakes. Interest paid annually can look small for most of the year and then jump at maturity, especially on fixed accounts. If you estimate too early and never update, you can miss thresholds. A final mistake is relying on one code notice and assuming it remains right forever. When savings rates, account balances, or employment circumstances change, your next year can look very different even with similar spending habits.
A good routine is simple: estimate in January, confirm after year-end interest posts, and compare with HMRC coding or return data. This three-step cycle catches most issues before they turn into unexpected bills.
Detailed FAQ (7 Questions)
1) How much savings interest can I earn tax-free in 2025/26?
You can have tax-free interest from two separate 0% layers. First is the starting rate for savings, up to £5,000, reduced by non-savings income above £12,570 on a £1-for-£1 basis. Second is your Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and £0 for additional-rate taxpayers. If you qualify for both layers, they can combine, so some people can receive more than £1,000 interest at 0% overall. Your exact amount depends on your non-savings income and tax band.
2) Does the £5,000 starting rate replace the Personal Savings Allowance?
No. They are different mechanisms. The starting-rate band is aimed at people with lower non-savings income and can shrink to zero as that income rises. PSA depends on your taxpayer band and remains separate. In many practical calculations, starting-rate relief is applied first, then PSA is applied to any remaining interest. This order is why a person with modest non-savings income can sometimes have a larger total amount of 0% interest than someone with higher earnings and the same bank balance.
3) Why does my starting-rate band shrink when my salary rises?
Because the rule is mechanical: non-savings income above £12,570 erodes the £5,000 starting-rate band at £1 per £1. If your non-savings income is £13,570, your starting-rate capacity drops to £4,000. At £15,000 it falls to £2,570. At £17,570 it becomes £0. This erosion is often the hidden reason people begin paying tax on savings interest after a pay rise, even if their savings balance did not change much.
4) Do banks deduct tax from savings interest before paying me?
Most UK savings interest is paid gross now, meaning no basic-rate deduction at source for standard personal accounts. However, banks and building societies report your interest to HMRC automatically. HMRC may then collect tax through PAYE code adjustments or through Self Assessment where needed. You should still keep your own annual totals, especially if you have multiple providers, fixed-term products, or accounts that credit interest at maturity rather than monthly.
5) When do I need Self Assessment for savings interest?
If your interest is over your PSA and tax is not fully handled through PAYE, Self Assessment is the practical route to report and settle the difference. If you are already filing returns, include savings interest anyway. Filing is also useful when your situation is complex, such as several account providers, changing employment, variable pension income, or large one-off maturity payments. A filed return often gives cleaner year-end certainty than relying on staged coding changes alone.
6) Is an ISA always better than a normal savings account?
Not always by headline rate, but often by after-tax result once your taxable interest starts to exceed 0% limits. Cash ISA interest is generally tax-free, which can simplify planning and reduce surprise bills. Compare net return after tax, not just gross interest rates. If a taxable account pays slightly more but pushes a chunk of interest into 20% or 40% tax, the ISA can still win. ISA use is especially helpful for higher-rate and additional-rate taxpayers with larger cash balances.
7) Is this calculator suitable for everyone in the UK?
It is a strong estimate for mainstream UK personal cases using the standard 2025/26 savings-interest framework. It is most useful for employees, pensioners, and savers with regular bank accounts. Complex situations can need bespoke treatment, including non-residency, trusts, and unusual relief interactions. Use this as a planning tool, then confirm final liabilities through HMRC records or professional advice when your circumstances are outside the straightforward pattern.
Final Planning Checklist
Before the tax year closes, estimate your full-year interest across all providers, including accounts that pay at maturity. Check whether your non-savings income pushes down your starting-rate band. Confirm which PSA tier applies to you based on your likely taxpayer status. Then decide if any remaining cash should move into ISA wrappers for future years. This four-step process prevents most avoidable savings-tax surprises and keeps your tax position predictable even when interest rates change quickly.
This calculator is for education and planning and does not replace formal tax advice. Always verify final figures with HMRC records for your exact circumstances.