Quick answer: from April 2027, tax on savings interest outside an ISA rises to 24% for basic-rate taxpayers, 44% for higher-rate and 49% for additional-rate. That’s 4 points higher than today (20%, 40%, 45%): 2 points from the 2025 Budget plus a further 2 points announced on 28 October 2026. Your Personal Savings Allowance (£1,000 basic, £500 higher, £0 additional) stays, and Cash ISA interest stays completely tax-free, with the Cash ISA limit kept at £20,000.
If you’ve worked hard to build up some savings, this one stings a little. The good news? Most people can avoid it completely with a bit of planning. Let me show you who’s affected, how much it could cost, and the simple fixes.
Savings tax rates from April 2027
| Taxpayer | Personal Savings Allowance | Tax on interest now (2026/27) | From April 2027 |
|---|---|---|---|
| Basic rate (20%) | £1,000 | 20% | 24% |
| Higher rate (40%) | £500 | 40% | 44% |
| Additional rate (45%) | £0 | 45% | 49% |
Tax on savings income only applies to interest above your Personal Savings Allowance, and only outside ISAs. If you have a low income, you may also get the starting rate for savings, which can make up to £5,000 of interest tax-free.
Will I pay more tax on my savings?
Only if your interest goes over your allowance. Here are some illustrations, assuming 4.5% interest in a normal savings account:
| Savings outside an ISA | Interest a year | Basic-rate tax now | Basic-rate tax from April 2027 | Higher-rate tax from April 2027 |
|---|---|---|---|---|
| £10,000 | £450 | £0 | £0 | £0 |
| £20,000 | £900 | £0 | £0 | £176 |
| £40,000 | £1,800 | £160 | £192 | £572 |
| £60,000 | £2,700 | £340 | £408 | £968 |
So a basic-rate taxpayer with less than about £22,000 in savings at 4.5% probably won’t pay any tax. A higher-rate taxpayer hits their £500 allowance with just over £11,000 saved.
How to avoid tax on savings interest
- Use your Cash ISA allowance. You can put up to £20,000 a year into Cash ISAs. The planned £12,000 cut for under-65s was scrapped in the October 2026 Budget, so this is still your best tool.
- Move savings before 5 April. Each tax year’s allowance is use-it-or-lose-it, so filling it before 5 April 2027 protects more interest from the higher rates.
- Consider Premium Bonds. Prizes are tax-free, though there’s no guaranteed return.
- Split savings with a lower-earning partner. If your partner pays less tax, interest in their name may fall within their allowance.
- Pay into a pension. For long-term money, pension contributions get tax relief and can bring you below the higher-rate threshold.
Want a home for monthly savings? See my best UK savings accounts comparison. Not sure whether cash or investing suits you? Read my Cash ISA vs Stocks and Shares ISA guide and ISAs explained.
How is savings tax collected?
Banks pay interest without taking tax off. HMRC usually collects any tax due by changing your tax code, or through Self Assessment if you already file a return. It’s a good idea to check your tax code each spring and your Personal Tax Account on GOV.UK.
Savings tax rise FAQs
What are the new savings tax rates from April 2027?
24% for basic-rate taxpayers, 44% for higher-rate and 49% for additional-rate, on interest above your Personal Savings Allowance.
Is the Personal Savings Allowance changing?
No change was announced. It stays at £1,000 for basic-rate taxpayers, £500 for higher-rate and £0 for additional-rate.
Is Cash ISA interest taxed?
No. Interest in a Cash ISA is tax-free and does not count towards your Personal Savings Allowance. The Cash ISA limit stays at £20,000 a year.
When does the savings tax increase start?
From the start of the 2027/28 tax year, 6 April 2027.
Why did savings tax go up?
The 2025 Budget set rates of 22%, 42% and 47% from April 2027, and the 28 October 2026 Budget added a further 2 percentage points.
How do I avoid paying tax on my savings?
Use your £20,000 ISA allowance, keep interest within your Personal Savings Allowance, consider Premium Bonds, and use a lower-earning partner’s allowance where it makes sense.
Sources
- Unbiased: Autumn Budget 2026
- St. James’s Place: The 2026 Autumn Budget
- GOV.UK: tax on savings interest
Last updated: 28 October 2026. Figures are illustrations, not advice. Measures depend on the Finance Bill and may change. Scottish taxpayers: savings interest uses UK rates.
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About the author: Dr Kalpana Govindaraasan is the PhD scientist, former secondary science teacher and mum behind MoneySavvyUK, turning complex household money topics into practical steps.