Tax on interest
Starting rate for savings: the £5,000 band and who keeps it
Enter your income other than savings, such as pension, wages or trading profit, and the interest you expect this tax year. The tool shows how much of the 0 % band is still yours and which layer covers each pound of interest.
How much of the £5,000 starting rate you keep
Starting rate available
£2,570
| Interest covered by your Personal Allowance | £0 |
| Interest taxed at the 0 % starting rate | £2,570 |
| Interest under the £1,000 or £500 allowance | £430 |
| Tax on the interest | £0.00 |
The starting rate for savings is a band of up to £5,000 of interest taxed at 0 %. It exists for people whose other income is low: it shrinks by £1 for every £1 of taxable non-savings income, meaning wages, pensions, trading profit and rent above the £12,570 Personal Allowance. Someone with £12,570 or less keeps the whole £5,000; at £16,000 of wages £1,570 remains, which is the example GOV.UK gives; at £17,570 it has gone. Dividends do not reduce it, because they are taxed after savings. The band is applied automatically and sits before the Personal Savings Allowance, so a saver with no other income can receive £18,570 of interest in 2026/27 with no tax at all. Section 9 of the Finance Act 2026 freezes the limit at £5,000 for every tax year up to 2030/31, so the 2027/28 rise in savings rates does not touch interest inside it.
Sums checked by Radif Partners · Editorial policy · How the sums are done
How the band shrinks
The band is measured against taxable income, not total income. First the Personal Allowance is used by your non-savings income. Whatever non-savings income remains taxable then eats into the £5,000 band pound for pound. So the band does not start shrinking at zero income but only once wages, pension or profit pass £12,570, and it is gone at £17,570. GOV.UK sets out the same test with worked figures on its page on how much interest is tax free.
| Other income | Starting rate left | Tax-free interest in all | Tax on £3,000, 2026/27 | Same, 2027/28 |
|---|---|---|---|---|
| £0 | £5,000 | £18,570 | £0.00 | £0.00 |
| £12,570 | £5,000 | £6,000 | £0.00 | £0.00 |
| £14,000 | £3,570 | £4,570 | £0.00 | £0.00 |
| £15,500 | £2,070 | £3,070 | £0.00 | £0.00 |
| £16,000 | £1,570 | £2,570 | £86.00 | £94.60 |
| £17,000 | £570 | £1,570 | £286.00 | £314.60 |
| £17,570 | £0 | £1,000 | £400.00 | £440.00 |
| £20,000 | £0 | £1,000 | £400.00 | £440.00 |
The table shows three zones. Below £12,570 part of the Personal Allowance is still free and covers interest before the band is even touched. Between £12,570 and £17,570 the band shrinks and the £1,000 Personal Savings Allowance stacks on top. Above that, only the allowance remains. Take £15,000 of pension and £3,000 of interest: £2,570 falls in the starting rate, £430 under the allowance, and the tax is £0.00.
Who still has the band
Most full-time employees have no starting rate left, because a salary above £17,570 fills it before any interest arrives. The people who keep some of it fall into a few groups:
- retired people living on the State Pension with a small private pension, covered in detail on the page for pensioners;
- part-time workers, carers and people between jobs whose pay for the year is low;
- self-employed people in a lean year, since the test uses taxable profit after expenses;
- people whose income is mostly interest, for example after selling a business or a home, who can use the whole band.
Because the band depends on income for the whole tax year, a year in which someone stops work in the autumn can give a starting rate that a full year of salary would have used up. The tax code during the year will not always reflect that; any excess collected is put right once HMRC reconciles the year, or can be reclaimed as described on the refund page.
Frozen until 2030/31
Section 9 of the Finance Act 2026 keeps the limit at £5,000 for each year to 2030/31. The Personal Allowance is frozen too (listed on the Income Tax rates page), so the point at which the band disappears stays at £17,570. Pensions that rise each year push more retired savers past it over time. In 2027/28 the rates on interest above all the allowances go up by two points, but interest inside the starting rate stays at 0 %. For the rest of the order, see the Personal Savings Allowance page.