How are my savings taxed?
Learn how the savings account you choose can affect the amount you’ll be taxed.
Important information
This article gives you information to help you make the most of your money, but it isn’t personal advice. If you’re not sure if a certain action is right for you, please ask for advice.
Last Updated: 5 March 2024
Important information - This article gives you information to help you make the most of your money, but it isn’t personal advice. If you’re not sure if a certain action is right for you, please ask for advice.
If you save outside of an ISA, the Personal Savings Allowance (PSA) may apply.
The PSA lets non- and basic-rate taxpayers earn some interest each tax year before they pay any tax on it. But your individual allowance will depend on which income tax band you fall into.
Below are the Personal Savings Allowances for each tax band in the 2025/2026 tax year:
| Tax band | Taxable income (excluding savings) |
Personal savings allowance |
|---|---|---|
| Basic-rate taxpayer | £12,571 to £50,270 | £1,000 |
| Higher-rate taxpayer | £50,271 to £125,140 | £500 |
| Additional-rate taxpayer | Over £125,140 | No personal savings allowance |
If your non-savings income is less than £17,750 you may be able to earn more interest before you pay any tax on it. This is called the starting rate for savings.
If you’re married or in a civil partnership you could split your savings with your spouse to effectively have a combined PSA of up to £2,000.
The personal savings allowance is calculated using rest of UK, not Scottish, income tax bands. Tax rules can change and benefits depend on personal circumstances.
What happens if you exceed your allowance?
If you exceed your personal allowance, your interest can be subject to UK income tax. The amount of tax you pay will depend on your tax band.
Read more about tax on savings interest
How a Cash ISA can help save tax
If you want to carry on earning interest, but are concerned about paying tax on your savings, you could consider opening a Cash ISA.
You can save up to £20,000 per tax year in a Cash ISA. Unlike other savings accounts, all interest earnt in a Cash ISA is free from UK income tax. So you don’t use any of your personal savings allowance.
Each tax year, you can split your allowance across different types of ISA. Just as long as you don’t exceed the total allowance across them all.
There are three types of Cash ISA savings.
- Fixed rate: Set interest rate over a fixed term. Penalty on withdrawing your cash before maturity.
- Easy access: Variable rate with flexibility to access your money.
- Limited access: Variable rate and limited access to you money.
Why the HL Cash ISA can help
With the HL Cash ISA, you can spread your £20,000 Cash ISA allowance across a range of banks. And a range of products.
That includes easy access, limited access, and fixed terms.
All offered by our banking partners. All through one online Cash ISA.
An easier way to manage your savings tax
Through one online account, Active Savings lets you choose easy access and fixed term savings offered by different banking partners.
Plus, you can download one consolidated tax certificate for all of your savings. Cutting out the hassle of sorting your savings tax.
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