Tax on interest
Savings interest above £100,000: the allowance taper
Enter your other income, your taxable interest and any gross Gift Aid or relief-at-source pension contributions. The tool shows the full cost of the interest, including the tax it adds to your pay.
Interest when your income is near £100,000
Tax caused by the interest, 2027/28
£1,870.00
| Effective rate on the interest | 46.8 % |
| Personal Allowance lost | £1,000 |
| Of which tax on your other income | £400.00 |
The knock-on uses the 2026/27 main rates, as Parliament sets the 2027/28 ones in the next Finance Act.
Above £100,000 of adjusted net income the Personal Allowance is withdrawn at £1 for every £2, and it has gone completely at £125,140. Interest counts towards adjusted net income like any other income, so in this zone each pound of interest does two things: it is taxed itself, at 40 % after a £500 allowance, and it removes 50p of Personal Allowance, which exposes 50p of salary to the 40 % rate. The combined cost of interest falling in the zone is 60 % in 2026/27. Someone with £100,000 of salary and £5,000 of interest loses £2,500 of allowance, and the interest costs £2,800.00 in all, 56.0 % of it. Above the zone there is no Personal Savings Allowance and interest is taxed at the additional rate. Gift Aid and relief-at-source pension contributions are deducted, grossed up, when adjusted net income is worked out, and so reduce the taper.
Sums checked by Radif Partners · Editorial policy · How the sums are done
Where the taper comes from
Section 35 of the Income Tax Act 2007 reduces the Personal Allowance by half of the amount by which adjusted net income exceeds £100,000. With the standard £12,570 allowance, nothing is left at £125,140. The GOV.UK Income Tax rates page gives the same figures. Because interest is income, it pushes adjusted net income up in the same way as a bonus would.
The salary is taxed first, so the allowance it would have used is the one that disappears. The extra tax therefore shows up on pay rather than on the interest line, and is easy to miss when looking only at the savings figures. The tool and the table below add the two together.
| Salary | Allowance lost | Tax on the interest itself | Extra tax on salary | Total | Effective rate |
|---|---|---|---|---|---|
| £95,000 | £0 | £1,800.00 | £0.00 | £1,800.00 | 36.0 % |
| £100,000 | £2,500 | £1,800.00 | £1,000.00 | £2,800.00 | 56.0 % |
| £105,000 | £2,500 | £1,800.00 | £1,000.00 | £2,800.00 | 56.0 % |
| £115,000 | £2,500 | £1,800.00 | £1,000.00 | £2,800.00 | 56.0 % |
| £121,000 | £2,070 | £2,043.00 | £828.00 | £2,871.00 | 57.4 % |
| £130,000 | £0 | £2,250.00 | £0.00 | £2,250.00 | 45.0 % |
Below £100,000 the interest is simply a higher rate taxpayer’s interest. From £100,000 the second column appears, and the effective rate climbs towards 60 % for interest that sits entirely inside the zone. Above £125,140 the allowance has already gone before any interest arrives, so there is nothing more to lose; the interest is then taxed at 45 % with no Personal Savings Allowance, as section 12B gives additional rate taxpayers none.
Adjusted net income, not salary
Adjusted net income starts from taxable income and subtracts certain reliefs. GOV.UK lists Gift Aid donations and pension contributions that receive basic rate relief at source: both are deducted at their grossed-up value, £1.25 for every £1 paid. Pension payments made gross, without relief at source, are taken off at the first step of the same calculation. So two savers with the same salary and the same interest can face different bills. With £100,000 of salary, £5,000 of interest and £5,000 of gross relief-at-source contributions, the tool finds an allowance loss of £0 and a total cost of £1,800.00, against £2,800.00 without them.
From 6 April 2027
Section 5 of the Finance Act 2026 raises the higher and additional savings rates to 42 % and 47 %. The taper and its thresholds stay as they are. The extra tax on salary depends on the main rates for 2027/28, not yet set by Parliament: the tool prices that part at the 2026/27 rates and says so in a note. On the same assumption interest inside the zone would cost 62 %.
Scottish taxpayers face the same taper. Their interest follows UK rates, but the salary exposed by the lost allowance is taxed at Scottish rates, so the second part of the cost differs; the Scotland page explains the split. For the allowance cliff lower down, at £50,270, see the Personal Savings Allowance page.