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UK Tax 2026/27How much savings interest you can earn tax-free depends entirely on your income tax band. Here are the exact figures for the 2026/27 tax year, with worked examples.
Reviewed August 2026 · Verified against gov.uk/apply-tax-free-interest-on-savings
| Tax band | Taxable income | PSA | Tax on excess interest |
|---|---|---|---|
| Non-taxpayer | Under £12,570 | Effectively £6,000* | 0% up to that limit |
| Basic rate | £12,571 – £50,270 | £1,000 | 20% |
| Higher rate | £50,271 – £125,140 | £500 | 40% |
| Additional rate | Over £125,140 | £0 | 45% |
*£12,570 personal allowance + £5,000 starting rate for savings + £1,000 PSA, if all your income is from savings. See the starting-rate section below.
The PSA is tax-free, not an additional allowance you claim. You just don't pay tax on interest up to that amount. HMRC gets the information directly from banks and adjusts your tax code (or asks you for a self-assessment return if you owe more).
Key rule: ISA interest never counts towards your PSA. ISA money is tax-free by a separate mechanism.
Income £12,571 to £50,270
Example: You earn £35,000 salary and have £30,000 in an easy-access account paying 4.5%.
Income £50,271 to £125,140
Example: You earn £75,000 salary and have £30,000 in the same 4.5% account.
Same balance, same rate — the higher-rate taxpayer pays £270 more just because of their PSA band.
Income over £125,140
Example: You earn £150,000 salary and have £30,000 in the same 4.5% account.
If your non-savings income is below £17,570, you also get a starting-rate band of up to £5,000 of savings interest at 0%. It's designed for people whose income mostly comes from savings (retirees, career-break, etc.).
The starting rate is reduced by £1 for every £1 your non-savings income exceeds the personal allowance (£12,570). Once non-savings income hits £17,570, the starting rate is fully used up.
Example: You have a pension of £14,000 and £40,000 in savings paying 4.5% (£1,800 interest).
Interest counts as income for the purposes of your income tax band. A basic-rate taxpayer whose salary is £48,000 and who earns £3,000 of savings interest will have total income of £51,000 — pushing £730 into the higher-rate band. Their PSA also drops from £1,000 to £500.
This is a common trap for people with meaningful cash savings sitting outside an ISA. Use the PSA calculator to model it against your own numbers.
General information, not personalised financial advice. UK tax figures for the 2026/27 tax year, verified against gov.uk. Tax rules can change and personal circumstances vary — consult HMRC or a qualified accountant for your own situation.