Tax on interest
Tax on fixed rate bonds: annual interest or one payment at the end
Enter your other income, the interest the bond pays at maturity and any other taxable interest in that year. The tool prices the same payment in 2026/27 and in 2027/28.
Same interest, which tax year? A bond maturing either side of 6 April 2027
Paid on or after 6 April 2027
£1,260.00
| Paid by 5 April 2027 | £1,200.00 |
| Difference | £60.00 |
| Your band with the interest | higher rate |
Interest is taxed in the year it is paid or made available to you, not the year it builds up.
Interest on a fixed rate bond is taxed in the tax year in which it is paid to you or made available to you, not the years in which it builds up. HMRC’s Savings and Investment Manual (SAIM2440) treats interest as made available when it is credited to an account the holder is free to draw on. For a bond that credits interest every year and lets you reach it, even with a penalty, each year’s interest is taxed in that year. For a bond that locks everything until the end, all the interest is taxed in the year it matures. On a two-year bond of £20,000 at 4.5 %, a basic rate taxpayer on £48,000 pays £0.00 in total if £900 is credited in each of 2026/27 and 2027/28, but £176.00 if all £1,800 arrives at maturity in 2027/28, because one year’s £1,000 allowance has to cover two years of interest and the rest meets the 22 % rate.
Sums checked by Radif Partners · Editorial policy · How the sums are done
Three ways a bond can pay
Fixed rate bonds differ less in their rate than in how they hand over the interest. Some pay it monthly or yearly into another account. Some add it to the bond each year but let you withdraw it. Others hold everything until the end of the term. For income tax the question is always the same: when was the interest paid to you, or made available to you? Monthly and yearly payments are taxed as they arrive. Interest credited to the bond each year is taxed each year if you could draw it. Interest locked away until maturity is taxed all at once, in the year the term ends.
No tax is taken off by the provider in any of these cases. The provider reports the interest to HMRC for the year in which it was paid, and HMRC collects any tax due through the routes set out on the GOV.UK page on paying tax on savings interest, usually a later tax code (see the tax code page).
Two years of interest, one allowance
The allowances are yearly and cannot be carried forward. A bond that pays at maturity therefore squeezes two, three or five years of interest into one year’s £1,000 or £500 allowance. The table takes a two-year bond of £20,000 at 4.5 %, earning £900 a year with no compounding, and compares three patterns: interest credited and accessible each year across 2026/27 and 2027/28, all £1,800 paid at maturity by 5 April 2027, and all £1,800 paid at maturity from 6 April 2027.
| Other income | Credited each year (total) | At maturity, by 5 April 2027 | At maturity, from 6 April 2027 |
|---|---|---|---|
| £15,000 | £0.00 | £0.00 | £0.00 |
| £35,000 | £0.00 | £160.00 | £176.00 |
| £48,000 | £0.00 | £160.00 | £176.00 |
| £60,000 | £328.00 | £520.00 | £546.00 |
At £15,000 of other income the unused starting rate and the allowance absorb everything, whatever the pattern. At £35,000 the starting rate has gone, so a single payment of £1,800 goes £800 beyond the allowance. On £48,000, interest spread over two years stays inside two separate allowances and costs nothing, while the same interest in a single year exceeds one allowance. On £60,000 the higher rate taxpayer’s £500 allowance is the constraint, and a single payment in 2027/28 is taxed at 42 % instead of 40 %.
A maturity date either side of 6 April 2027
Section 5 of the Finance Act 2026 sets the savings rates for 2027/28 at 22 %, 42 % and 47 %. A bond whose interest is paid on 5 April 2027 and one paid a day later can therefore produce different bills on the same sum. The tool at the top prices both dates for your own figures, including other interest you expect that year, since several accounts share the same allowance.
The year of payment also decides which year’s other income is used. A saver who retires during the term may have a much lower income in the year the bond matures, freeing the Personal Allowance or the starting rate described on the GOV.UK page on tax-free interest. A saver whose pay rises may see the opposite. The Personal Savings Allowance page explains the band test that decides which allowance applies, and the page on the 2027/28 rates the size of the increase.