Do I pay tax on savings interest over my allowance?
You only pay tax on savings interest that exceeds your Personal Savings Allowance, and the size of that allowance depends on your tax band. Interest above the allowance is taxed at your usual rate. HMRC normally collects any tax due automatically, often through your tax code.
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Check what you're owed →For most people, a good amount of savings interest is tax-free thanks to the Personal Savings Allowance, which is larger for basic-rate taxpayers, smaller for higher-rate taxpayers and not available at all to additional-rate taxpayers. Only the interest above your allowance is taxable, and it is taxed at the same rate as the rest of your income.
With higher interest rates, more savers are finding that their interest tips over the allowance, especially if they hold significant balances outside ISAs. Interest earned inside an ISA does not count towards the allowance at all, so where you hold your savings can make a real difference to whether you owe anything.
You usually do not need to do anything to pay the tax: banks report interest to HMRC, which then collects what is due, frequently by adjusting your tax code rather than sending a separate bill. It is still worth checking that the amount being collected looks right, and considering whether tax-free options like ISAs would suit your savings better going forward.
How to handle tax on savings over your allowance
- Work out your allowance. Identify your tax band to find the size of your Personal Savings Allowance.
- Total your taxable interest. Add up your savings interest, excluding any earned inside ISAs, to see how much is above the allowance.
- Check HMRC’s collection. Confirm any tax due is being collected correctly, usually through your tax code.
- Plan for the future. Consider tax-free options such as ISAs if you regularly exceed your allowance.
Key figures (official sources)
- £1,000Personal Savings Allowance — basic-rate taxpayersSource: GOV.UK — Tax on savings interest (checked 2026-06-28)
- £500Personal Savings Allowance — higher-rate taxpayersSource: GOV.UK — Tax on savings interest (checked 2026-06-28)
- £0Personal Savings Allowance — additional-rate taxpayersSource: GOV.UK — Tax on savings interest (checked 2026-06-28)
Frequently asked questions
- Is all my savings interest taxed?
- No. Only interest above your Personal Savings Allowance is taxable, and the allowance depends on your tax band. ISA interest is excluded entirely.
- How is the tax collected?
- Usually automatically. Banks report interest to HMRC, which often collects any tax due by adjusting your tax code.
- Does holding savings in an ISA help?
- Yes. Interest earned in an ISA is tax-free and does not count towards your allowance, so it can reduce or remove a tax charge.
- Should I check the tax being collected?
- Yes. It is worth confirming the amount HMRC collects matches your actual interest, as the figures rely on accurate reporting.
MoneyFinder is an independent sign-posting service that helps you find financial support you may be entitled to. We are not a government body and do not provide financial advice. Figures are taken from the official sources cited above and were correct when last checked — always confirm current details on the linked GOV.UK pages.