Tax on interest
Savings tax rates for 2027/28: two points more in every band
Enter your other income and the taxable interest you expect in a year. The tool runs the same figures through the 2026/27 and 2027/28 rules and shows the difference.
What the 2027/28 savings rates add to your bill
Extra tax from April 2027
£40.00
| Tax 2026/27 (20/40/45 %) | £800.00 |
| Tax 2027/28 (22/42/47 %) | £840.00 |
| Interest above your allowances | £2,000 |
From 6 April 2027 interest that is not covered by any allowance is taxed at 22 % in the basic rate band, 42 % in the higher rate band and 47 % in the additional rate band, against 20 %, 40 % and 45 % in 2026/27. The new rates were announced at the Budget of 26 November 2025 and are already law: section 5 of the Finance Act 2026 sets them for 2027/28. Nothing else in the calculation moves. The Personal Allowance stays at £12,570, the starting rate limit at £5,000 and the Personal Savings Allowance at £1,000 or £500, so the change only touches interest above them, which costs 2p more per pound. A higher rate taxpayer on £65,000 with £2,500 of interest pays £800.00 on it in 2026/27 and £840.00 in 2027/28. The main rates on wages and pensions for 2027/28 have not yet been set.
Sums checked by Radif Partners · Editorial policy · How the sums are done
What the law changes, and what it leaves alone
Section 3 of the Finance Act 2026 sets the savings rates for 2026/27 at 20 %, 40 % and 45 %, the same as the main rates. Section 5 then sets 22 %, 42 % and 47 % for 2027/28. From that year, interest will be taxed at a different rate from salary in the same band. The Budget announcement and its link with the ISA reform appear in HMRC’s tax-free savings newsletter 19.
The allowances are fixed separately. Section 9 freezes the £5,000 starting rate limit to 2030/31, and the Personal Savings Allowance has not been touched. The bands are frozen as well, so the higher rate still starts at £50,270 of total income and the additional rate at £125,140 of taxable income.
Extra tax by income and interest
| Other income | Interest £2,000 | Interest £5,000 | Interest £10,000 |
|---|---|---|---|
| £30,000 | £20.00 (£220) | £80.00 (£880) | £180.00 (£1,980) |
| £45,000 | £20.00 (£220) | £80.00 (£880) | £190.00 (£3,036) |
| £60,000 | £30.00 (£630) | £90.00 (£1,890) | £190.00 (£3,990) |
| £90,000 | £30.00 (£630) | £90.00 (£1,890) | £190.00 (£3,990) |
| £150,000 | £40.00 (£940) | £100.00 (£2,350) | £200.00 (£4,700) |
The extra cost is always two pence for each pound of interest that is actually taxed, so it scales with the interest left after the allowances, not with the balance. A basic rate taxpayer with £2,000 of interest has £1,000 taxable and pays £20 more a year. The largest increases fall on people with large balances in taxable accounts: £10,000 of interest on top of £45,000 of salary costs £2,846.00 in 2026/27 and £3,036.00 in 2027/28, partly because the interest pushes much of itself into the higher rate band.
Who feels it most
In practice the people affected are those with interest above their allowances: higher rate taxpayers with more than about £12,500 in taxable accounts at 4 %, retired savers with large deposits and modest pensions, and anyone who receives a large lump of interest in one year, such as from a bond that pays at maturity. The page on fixed rate bonds shows how a maturity date either side of 6 April 2027 changes the bill.
The same date brings the cash ISA reform: savers aged 64 or under at the end of the tax year can put at most £12,000 a year into cash ISAs, so some cash that would have gone into an ISA ends up in a taxable account just as the rate on it rises. Cash waiting inside investment ISAs meets a flat charge at the new basic savings rate, explained on the stocks and shares ISA cash page.
What is not yet known
Parliament has not fixed the main income tax rates for 2027/28, nor the Scottish rates for that year. Neither affects the tax on interest itself, since savings have their own rates and are taxed on UK bands everywhere. They matter only where interest reduces the Personal Allowance above £100,000; in that case the tool uses the 2026/27 main rates and labels the figure as an assumption.