UK Personal Savings Allowance (2026/27)
The Personal Savings Allowance (PSA) is the slice of interest income you can earn tax-free on top of any ISA holdings. It depends on your Income Tax band: £1,000 for basic-rate, £500 for higher-rate, £0 for additional-rate. Frozen since 2016, never indexed for inflation.
PSA by tax band
| Income Tax band | Salary range | PSA |
|---|---|---|
| Basic rate | £12,571 to £50,270 | £1,000 |
| Higher rate | £50,271 to £125,140 | £500 |
| Additional rate | Above £125,140 | £0 |
Worked example
A basic-rate taxpayer with £40,000 salary plus £1,500 of savings account interest pays 20% on £500 (= £100), with the first £1,000 of interest covered by the PSA. Same person with £20,000 in a Cash ISA earning 5% (£1,000) gets the ISA interest tax-free AND the £1,000 PSA, so the next £1,000 of interest in a general savings account is also tax-free.
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 (above £125,140 of adjusted income). PSA covers interest from UK bank, building society, credit union accounts plus most fixed-rate savings bonds. Unchanged since introduction in April 2016 - frozen, not indexed.
- What is the starting rate for savings?
- A separate £5,000 band of "starting rate for savings" applies at 0% tax. It is available only to low non-savings-income taxpayers: it is reduced £1 for every £1 of non-savings income above the £12,570 Personal Allowance. Above £17,570 of non-savings income the starting rate is fully tapered away. Mostly relevant to retirees living off interest with small pension income, or savers with no employment income.
- How does ISA interest interact with PSA?
- ISA interest is exempt from Income Tax entirely - it does NOT use any of the £1,000/£500 PSA. So a basic-rate saver with £20,000 in an ISA can still earn another £1,000 of interest tax-free in a general savings account. ISAs are always more tax-efficient than the PSA when you have the choice, but the PSA is useful for interest beyond the £20,000 annual ISA cap.
- Do I have to declare interest under the PSA?
- No - banks and building societies report interest directly to HMRC under the "Bank and Building Society Interest" (BBSI) reporting scheme. Interest within your PSA is automatically not taxed via your PAYE code. Interest above the PSA is taxed at your marginal rate, usually collected by HMRC adjusting your tax code or via Self Assessment.
- Does the PSA apply to dividend income?
- No - dividend income has its own separate £500 Dividend Allowance (see /dividend-allowance). PSA covers only interest (savings accounts, government and corporate bonds, peer-to-peer lending platforms). Dividends from shares are taxed at 8.75% (basic), 33.75% (higher) and 39.35% (additional) above the £500 dividend allowance.