Savings Interest Tax 2027/28 — Rates, Allowances & ISA Planning

From 6 April 2027, UK Income Tax rates on taxable savings income are 22% for the basic rate, 42% for the higher rate and 47% for the additional rate. The change is enacted in Finance Act 2026. It does not mean that every pound of bank interest is taxed: the Personal Allowance, Starting Rate for Savings, Personal Savings Allowance and ISA rules still apply first.

The practical question for 2027/28 is not simply “what rate is my bank paying?” It is how much of your interest remains inside an allowance, which rate applies to the taxable slice, and whether putting new money into an ISA avoids the charge. Use the Savings Interest Calculator→ for an estimate, then check the final position against HMRC guidance.

What changes in 2027/28?

Finance Act 2026 sets the savings rates for the tax year beginning 6 April 2027:

These rates apply to the taxable part of savings income after any available allowances and reliefs. They do not apply to the balance in a savings account, and they do not turn the account's interest rate into a tax rate. A 4% savings account still pays 4% interest before tax; the tax is calculated on the interest received or treated as received.

The rates apply from 6 April 2027, so interest belonging to the 2026/27 tax year is not retrospectively charged at the new rates. Banks may pay interest monthly, annually or at maturity; the tax-year timing and the account terms determine which year's income is relevant.

Which allowances still reduce the bill?

The 2027/28 rate increase does not remove the main savings-income allowances:

The order matters. Your other income helps determine your tax band, and savings interest is then considered when working out the final taxable income. Interest can push someone into a higher band, which can reduce the Personal Savings Allowance from £1,000 to £500 or remove it altogether.

The Starting Rate for Savings is different from the Personal Savings Allowance. It is designed for people with low non-savings income and can provide up to £5,000 of savings income at 0%. If your other income is £17,570 or more, the Starting Rate is normally unavailable; below that point, each pound of other income above the Personal Allowance reduces the £5,000 limit.

Worked examples

Basic-rate saver with taxable interest

Assume Alex has £35,000 of non-savings income and £1,500 of taxable interest in 2027/28. Alex remains a basic-rate taxpayer and has a £1,000 Personal Savings Allowance.

The £22 rate does not apply to the full £1,500 because the first £1,000 is within the allowance. The example excludes other reliefs and assumes the bank interest is taxable outside an ISA.

Higher-rate saver with the same interest

Assume Morgan has £60,000 of non-savings income and £1,200 of taxable interest. Morgan has a £500 Personal Savings Allowance.

The higher rate is applied to the £700 above the allowance, not to the full account balance or the full interest amount.

What about a Cash ISA?

Interest inside an ISA does not count towards the Personal Savings Allowance. The ISA subscription limit is a separate planning rule. From 6 April 2027, the announced Cash ISA limit is £12,000 for most savers under 65, within the overall annual ISA limit of £20,000. Savers aged 65 or over retain the £20,000 Cash ISA limit described in the published reform material.

This is a limit on new subscriptions, not a cap on an existing Cash ISA balance. An account already holding more than £12,000 does not need to be reduced to £12,000 merely because the new tax year starts. Transfers between ISA providers follow separate ISA transfer rules; withdrawing money and paying it back in is not automatically the same as an ISA transfer.

Read the Cash ISA Limit 2027/28 guide for the age exception, transfers and the overall allowance. If taxable interest remains outside an ISA, use the Savings Interest Calculator→ to compare the after-tax result.

How taxable interest is collected

HMRC can normally collect tax on savings interest through a PAYE tax-code adjustment when the interest is reported by the bank. The collection route does not change the underlying tax calculation. People with Self Assessment, foreign income or more complicated circumstances may need to report the interest through their return or use HMRC's specific process.

Do not treat a bank's tax deduction or HMRC tax-code change as proof that the correct allowance was applied. Check the interest total, the tax year, whether the account was an ISA, and the band used for the calculation. Joint-account interest is generally divided between the account holders, so each person's allowances and other income can produce a different result.

A practical planning checklist

Frequently Asked Questions

Evidence and decision checks

A reliable savings interest tax 2027 28 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Evidence and decision checks

A reliable savings interest tax 2027 28 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Evidence and decision checks

A reliable savings interest tax 2027 28 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Use the Savings Interest Calculator→, then compare the result with the Cash ISA Limit 2027/28 guide and the wider UK Tax Changes 2027/28 guide.

Official sources

• UK Parliament: Finance Act 2026
• HMRC: changes to property, savings and dividend income tax rates
• HM Treasury: Budget 2025 rates and allowances
• GOV.UK: tax on savings interest
• HMRC: ISA reform 2027 factsheet

These UK Parliament, HMRC and HM Treasury sources are the official references for the 2027/28 savings rates, Personal Savings Allowance, Starting Rate for Savings and ISA treatment discussed here.