UK Personal Savings Allowance (2026/27)
UK Personal Savings Allowance 2026/27: £1,000 of interest tax-free for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate.
The Personal Savings Allowance (PSA) is the amount of interest you can earn outside an ISA each tax year without paying tax on it. It depends on your Income Tax band: £1,000 for basic-rate, £500 for higher-rate and £0 for additional-rate taxpayers. The amounts have been the same since the allowance began in 2016/17.
PSA by tax band
| Income Tax band | Total income including interest (standard Personal Allowance) | PSA |
|---|---|---|
| Basic rate | Up to £50,270 | £1,000 |
| Higher rate | £50,271 to £125,140 | £500 |
| Additional rate | Above £125,140 | £0 |
The band is decided by your total income with the interest added on, so interest can itself take you into the higher-rate band and cut the allowance to £500. Scottish taxpayers are tested against these UK bands for the PSA, not the Scottish ones (Income Tax Act 2007 s.12B(8)).
Worked example
A basic-rate taxpayer with a £40,000 salary and £1,500 of interest from an ordinary savings account stays inside the basic-rate band, so the first £1,000 of interest is covered by the PSA and the remaining £500 is taxed at 20%: £100 of tax. Interest earned inside an ISA would not count towards the £1,500 at all.
Related
Frequently asked questions
What is the UK Personal Savings Allowance for 2026/27?
The Personal Savings Allowance (PSA) for 2026/27 is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. Which one you get depends on your total income for the year including the interest itself: £500 if any of it is taxed at the higher rate, £0 if any of it is taxed at the additional rate (Income Tax Act 2007 s.12B). The amounts have not changed since the allowance started in the 2016/17 tax year.
What is the starting rate for savings?
A separate band of up to £5,000 of interest can be tax-free under the starting rate for savings. It is reduced by £1 for every £1 of other income (wages, pension and so on, not savings or dividends) above the £12,570 Personal Allowance, so it is gone once that other income reaches £17,570. You can have the starting rate and the Personal Savings Allowance together.
How does Individual Savings Account (ISA) interest interact with the PSA?
Interest earned inside an ISA is not taxed and is ignored for the PSA, so it does not use any of the allowance. You can pay up to £20,000 a year into ISAs in 2026/27; interest on savings held outside an ISA is what the PSA covers.
Do I have to declare interest under the PSA?
Banks and building societies tell HMRC how much interest they paid you after each tax year. If your interest is £10,000 or less and you are not in Self Assessment, HMRC works out any tax due and usually collects it through your tax code. If your interest is more than £10,000 you must report it on a Self Assessment tax return. If you already file a return, report your interest there.
Does the PSA apply to dividend income?
No. Dividends have their own separate £500 Dividend Allowance. Above it, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate) in 2026/27.