Most people can earn some interest from their savings without paying tax. Your allowances for earning interest before you have to pay tax on it include your: Personal Allowance starting rate for savings Personal Savings Allowance You get these allowances each tax year (6 April to 5 April). How much you get depends on your other income. You may be able to get an estimate of how much tax you have to pay on interest from your savings . This guide is also available in Welsh (Cymraeg) . Personal Allowance You can use your Personal Allowance to earn tax-free interest if you have not used it up on your wages, pension or other income. Starting rate for savings You may also get up to 拢5,000 of interest and not have to pay tax on it. This is your starting rate for savings. The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be. If your other income is 拢17,570 or more You鈥檙e not eligible for the starting rate for savings if your other income is 拢17,570 or more. If your other income is less than 拢17,570 Your starting rate for savings is a maximum of 拢5,000. Every 拢1 of other income above your Personal Allowance reduces your starting rate for savings by 拢1. Example You earn 拢16,000 of wages and get 拢200 interest on your savings. Your Personal Allowance is 拢12,570. It鈥檚 used up by the first 拢12,570 of your wages. The remaining 拢3,430 of your wages (拢16,000 minus 拢12,570) reduces your starting rate for savings by 拢3,430. Your remaining starting rate for savings is 拢1,570 (拢5,000 minus 拢3,430). This means you will not have to pay tax on your 拢200 savings interest. Personal Savings Allowance You may also get up to 拢1,000 of interest and not have to pay tax on it, depending on which Income Tax band you鈥檙e in. This is your Personal Savings Allowance. To work out your tax band, add all the interest you鈥檝e received to your other income. Income Tax band Personal Savings Allowance Basic rate 拢1,000 Higher rate 拢500 Additional rate 拢0 Interest covered by your allowance Your allowance applies to interest from: bank and building society accounts savings and credit union accounts unit trusts, investment trusts and open-ended investment companies peer-to-peer lending trust funds payment protection insurance ( PPI ) government or company bonds life annuity payments some life insurance contracts Savings in tax-free accounts like Individual Savings Accounts ( ISAs ) and some National Savings and Investments accounts do not count towards your allowance. There are different rules for tax on foreign savings and children鈥檚 accounts . Interest on joint accounts If you have a joint account, interest will be split equally between the account holders. Contact HM Revenue and Customs ( HMRC ) if you think it should be split differently. If you go over your allowance You pay tax on any interest over your allowance at your usual rate of Income Tax . If you鈥檙e self-employed If you complete a Self Assessment tax return , report any interest earned on savings there. You need to register for Self Assessment if your income from savings and investments is over 拢10,000. Check if you need to send a tax return if you鈥檙e not sure. If you鈥檙e employed or get a pension HMRC will change your tax code so you pay the tax automatically. To decide your tax code, HMRC will estimate how much interest you鈥檒l get in the current year by looking at how much you got the previous year. HMRC will send a tax calculation letter and tell you if you have a tax overpayment or underpayment . If you do not receive a letter by 31 March 2025, you must contact HMRC as soon as possible to avoid a penalty. If you鈥檙e not employed, do not get a pension or do not complete Self Assessment Your bank or building society will tell HMRC how much interest you received at the end of the year. HMRC will tell you if you need to pay tax and how to pay it. If you already paid tax on your savings income You can reclaim tax paid on your savings interest if it was below your allowance. You must reclaim your tax within 4 years of the end of the relevant tax year. You can claim through your Self Assessment Tax Return if you complete one. If you do not send a Self Assessment tax return, find out how claim a refund .

If you鈥檙e self-employed and need to declare savings interest from a previous tax year, you鈥檒l have to report it in a Self Assessment tax return . HM Revenue and Customs (HMRC) automatically deducts tax on any savings interest you owe if you鈥檙e employed or get a pension. Reclaim tax from previous years You can reclaim tax paid on your savings interest if your income was below your Personal Allowance . You must reclaim your tax within 4 years of the end of the relevant tax year. How to claim You can claim through your Self Assessment tax return if you complete one. If you do not send a Self Assessment tax return, find out how to claim a refund . Get help You can contact HMRC if you need help and advice.

Tax on savings interest: How much tax you pay

Tax on savings interest

How much tax you pay

Most people can earn some interest from their savings without paying tax.

Your allowances for earning interest before you have to pay tax on it include your:

Personal Allowance
starting rate for savings
Personal Savings Allowance

You get these allowances each tax year (6 April to 5 April). How much you get depends on your other income.

You may be able to get an estimate of how much tax you have to pay on interest from your savings.

This guide is also available in Welsh (Cymraeg).

Personal Allowance

You can use your Personal Allowance to earn tax-free interest if you have not used it up on your wages, pension or other income.

Starting rate for savings

You may also get up to 拢5,000 of interest and not have to pay tax on it. This is your starting rate for savings.

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.

If your other income is 拢17,570 or more

You鈥檙e not eligible for the starting rate for savings if your other income is 拢17,570 or more.

If your other income is less than 拢17,570

Your starting rate for savings is a maximum of 拢5,000. Every 拢1 of other income above your Personal Allowance reduces your starting rate for savings by 拢1.

Example

You earn 拢16,000 of wages and get 拢200 interest on your savings.

Your Personal Allowance is 拢12,570. It鈥檚 used up by the first 拢12,570 of your wages.

The remaining 拢3,430 of your wages (拢16,000 minus 拢12,570) reduces your starting rate for savings by 拢3,430.

Your remaining starting rate for savings is 拢1,570 (拢5,000 minus 拢3,430). This means you will not have to pay tax on your 拢200 savings interest.

Personal Savings Allowance

You may also get up to 拢1,000 of interest and not have to pay tax on it, depending on which Income Tax band you鈥檙e in. This is your Personal Savings Allowance.

To work out your tax band, add all the interest you鈥檝e received to your other income.

Income Tax band	Personal Savings Allowance
Basic rate	拢1,000
Higher rate	拢500
Additional rate	拢0

Interest covered by your allowance

Your allowance applies to interest from:

bank and building society accounts
savings and credit union accounts
unit trusts, investment trusts and open-ended investment companies
peer-to-peer lending
trust funds
payment protection insurance (PPI)
government or company bonds
life annuity payments
some life insurance contracts

Savings in tax-free accounts like Individual Savings Accounts (ISAs) and some accounts do not count towards your allowance.

There are different rules for tax on foreign savings and children鈥檚 accounts.

Interest on joint accounts

If you have a joint account, interest will be split equally between the account holders. Contact HM Revenue and Customs (HMRC) if you think it should be split differently.

If you go over your allowance

You pay tax on any interest over your allowance at your usual rate of Income Tax.

If you鈥檙e self-employed

If you complete a Self Assessment tax return, report any interest earned on savings there.

You need to register for Self Assessment if your income from savings and investments is over 拢10,000. Check if you need to send a tax return if you鈥檙e not sure.

If you鈥檙e employed or get a pension

HMRC will change your tax code so you pay the tax automatically. To decide your tax code, HMRC will estimate how much interest you鈥檒l get in the current year by looking at how much you got the previous year.

HMRC will send a tax calculation letter and tell you if you have a tax overpayment or underpayment.

If you do not receive a letter by 31 March 2025, you must contact HMRC as soon as possible to avoid a penalty.

If you鈥檙e not employed, do not get a pension or do not complete Self Assessment

Your bank or building society will tell HMRC how much interest you received at the end of the year. HMRC will tell you if you need to pay tax and how to pay it.

If you already paid tax on your savings income

You can reclaim tax paid on your savings interest if it was below your allowance. You must reclaim your tax within 4 years of the end of the relevant tax year.

You can claim through your Self Assessment Tax Return if you complete one.

If you do not send a Self Assessment tax return, find out how claim a refund.

View a printable version of the whole guide

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