Savings Interest Tax Rates Rise to 22%, 42% and 47% From April 2027

From 6th April 2027, the income tax rates on taxable savings interest will rise from 20%, 40% and 45% to 22%, 42% and 47%. These rates are set in the Finance Act 2026 and apply across the UK, including Scotland. The change will not mean every saver pays more tax: the result depends on your interest, other income and available allowances.

What is changing on 6th April 2027?

The new rates start at the beginning of the 2027/28 tax year. Section 5 of the Finance Act 2026 sets them at 22% for the basic savings rate, 42% for the higher savings rate and 47% for the additional savings rate. In 2026/27, those rates are 20%, 40% and 45%. The savings rates apply UK-wide. Scotland has different income tax rates for salary and some other income, which can affect your overall tax position, so check HMRC guidance if you are unsure which rate applies to you.

These are the rates applied to taxable savings income, not a tax on the full balance in a savings account. The amount of interest you receive is still central to the calculation, as are your income tax position and any allowances that cover some or all of that interest.

The savings interest tax rates compared

The rise is two percentage points in each band. It does not mean everyone with a savings account will owe tax, or that the tax on every person’s interest will rise by the same amount. Some people’s interest is covered by the Personal Savings Allowance or the starting rate for savings, while others may have no tax to pay because their overall income is low enough for allowances to cover it.

Who pays tax on savings interest?

Interest from many ordinary savings accounts is taxable income, including interest from easy-access accounts, fixed-term accounts and some other interest-paying products. The bank or building society may pay the interest without deducting tax, but that does not automatically mean it is tax-free. The amount you may owe depends on your total taxable income and which allowances you can use.

Your Personal Allowance is the amount of income you can usually receive before paying income tax. It can cover some or all of your interest if you have not used it up with earnings, pension income or other taxable income. Once the Personal Allowance and any relevant starting rate for savings or Personal Savings Allowance have been taken into account, any remaining taxable interest may be taxed at the savings rate that applies to you.

Someone who earns interest does not necessarily have to pay tax on it. Equally, receiving interest without tax being deducted at source does not establish that no tax is due. Check the overall position rather than looking at the savings account in isolation.

How the Personal Savings Allowance works

The Personal Savings Allowance (PSA) lets eligible taxpayers receive some savings interest without paying tax on it. It remains unchanged for 2027/28: basic-rate taxpayers can usually receive up to £1,000 of interest tax-free, and higher-rate taxpayers up to £500. Additional-rate taxpayers do not get a PSA. The allowance is based on your tax position, not on how many savings accounts you have.

The Personal Savings Allowance itself is separate from these rate changes. It can mean that some or all of a person’s interest remains untaxed even after the rates change. Check current HMRC guidance before the 2027/28 tax year, as rules and personal circumstances can affect the final calculation.

Some people with low income from other sources can also use the starting rate for savings. It can cover up to £5,000 of savings interest at 0%, but the amount available falls as your other taxable income rises. For 2027/28, the starting rate limit remains £5,000; it is generally available where your taxable income apart from savings and dividends is below £17,570. It can work alongside the Personal Savings Allowance, but it is not an extra £5,000 available to everyone.

Illustrative examples: why the effect will differ

The examples below are illustrations of the rate change only, not personalised tax calculations. They assume the stated interest is taxable, sits entirely within the named band and is not covered by an allowance. Actual tax can be lower, or nil, if allowances apply or your wider tax position differs.

These comparisons show what a two-percentage-point rise means on £100 of interest that is fully taxable at the named rate. They do not show what any particular person will owe across a full tax year.

What about Cash ISAs?

Interest earned inside a Cash ISA remains tax-free under the existing ISA rules. That is different from interest in an ordinary taxable savings account, where the Personal Savings Allowance and other income tax rules may apply. The rate change described in this article concerns savings income that is subject to income tax; it does not mean that tax is charged on interest inside a Cash ISA.

The annual amount you can put into an ISA is separate from the rate at which taxable savings interest is taxed. See our guide to the Cash ISA limit changing from April 2027 for information about that separate change.

Do savers need to do anything?

You do not need to close an account or move your savings solely because these rates are changing. It is sensible to review how much interest you expect to receive and whether the Personal Savings Allowance, starting rate for savings or Personal Allowance covers it. If you have several accounts, consider the combined interest across them rather than each account separately.

HMRC may use information supplied by banks and building societies to check whether tax is due. Depending on your circumstances, HMRC may adjust your tax code or ask you to report interest. If you complete Self Assessment, follow the current guidance on declaring taxable interest. Check the official rules closer to April 2027 if you are unsure how to report your own savings income.

Frequently asked questions

Information checked

This article was checked on 13th October 2026 against the legislation and official guidance available at that date. The new rates are set out in section 5 of the Finance Act 2026. The government’s official tax-rates guidance confirms that the savings rates apply UK-wide and that the Personal Savings Allowance and starting rate for savings remain unchanged. For practical information, see GOV.UK guidance on tax-free savings interest.

This article provides general information, not personal tax advice. Your tax position depends on your circumstances and the rules in force for the relevant tax year. Check HMRC guidance if you need to establish what you owe.