After Tax Interest Calculator UK
Estimate tax on savings interest using a selected tax band and your remaining Personal Savings Allowance. Compare taxable interest with tax-free ISA interest under 2026/27 HMRC statutory rules.
2026/27 estimate
Investment income and gain estimate
A selected-band estimate, not a full tax return calculation. It applies one tax rate to the amount above the allowance you enter.
Gross annual amount
£2,500.00
Tax estimate
£300.00
Net annual amount
£2,200.00
Net yield on investment
4.40%
Default remaining allowances: savings Personal Savings Allowance £1,000/£500/£0 by selected band; dividend allowance £500; Capital Gains Tax annual exempt amount £3,000. You can edit the remaining allowance. Rates used: savings income 20%/40%/45%, dividends 10.75%/35.75%/39.35%, and gains 18%/24%/24%. ISA returns are treated as tax-free. No National Insurance is included. Assumes the whole taxable amount falls in your selected band; it does not model other income, the Starting Rate for Savings, allowance tapering, Scottish Income Tax, losses, asset-specific CGT rates or interactions across bands. The yield result is an annualised simple estimate, not a forecast.
Personal Savings Allowance (PSA) Guide Card
Enacted under Section 12 of the Income Tax Act 2007 (ITA 2007), the PSA grants individual UK taxpayers a specific annual tax-free savings interest threshold based strictly on their marginal income tax band.
Applies to taxable income between £12,571 and £50,270. Any interest earned above £1,000 is taxed at the 20% Basic Rate.
Applies to taxable income between £50,271 and £125,140. Allowance is halved. Any interest earned above £500 is taxed at the 40% Higher Rate.
Applies to earnings exceeding £125,140. 100% of savings interest is taxed at the 45% Additional Rate from the very first penny.
Cash ISA vs Taxable Savings Account Comparison (2026/27)
Under the Individual Savings Account Regulations 1998 (SI 1998/1870), depositing your cash into an ISA creates a permanent legal tax shield. The table below details how the statutory £20,000 annual ISA allowance protects your savings interest permanently from HMRC compared to a standard taxable bank account:
| Statutory Feature | Standard Taxable Savings Account | Cash ISA (Tax Shelter) | ISA Strategic Advantage |
|---|---|---|---|
| Annual Statutory Deposit Limit | Unlimited deposits permitted | £20,000 per tax year (2026/27) | Generous £20k tax-sheltered allowance |
| Income Tax on Interest | 20%, 40%, or 45% once PSA is exceeded | 0% completely tax-free permanently | Zero tax liability regardless of total interest |
| Impact on Personal Savings Allowance (PSA) | Consumes your £1,000 or £500 PSA allowance | Does NOT count towards or consume PSA | Preserves your full PSA for other accounts |
| HMRC Reporting Requirements | Banks report interest automatically; HMRC alters PAYE code or requires SA100 | 100% exempt; never reported on tax returns | Zero paperwork and no PAYE code reductions |
| Long-Term Compound Growth Protection | Tax drag reduces compounding return every year | Compound growth compounds tax-free forever | Substantially higher long-term wealth accumulation |
| Return on £20k at 5.0% AER (Basic Rate) | £800 net return (£200 tax paid if PSA used) | £1,000 net return (£0 tax paid) | +£200 extra cash in your bank account |
| Return on £20k at 5.0% AER (Higher Rate) | £600 net return (£400 tax paid if PSA used) | £1,000 net return (£0 tax paid) | +£400 extra cash in your bank account |
| Return on £20k at 5.0% AER (Additional Rate) | £550 net return (£450 tax paid, £0 PSA) | £1,000 net return (£0 tax paid) | +£450 extra cash in your bank account |
Permanent Tax-Free Status & Spousal Transfer
Unlike taxable accounts where interest income may push you across tax thresholds (such as the £50,270 Higher Rate threshold or the £100,000 Personal Allowance taper trap), interest generated within an ISA does not count toward your Adjusted Net Income (ANI). Furthermore, under Section 13 of the ISA Regulations, surviving spouses inherit an Additional Permitted Subscription (APS) equal to the deceased spouse's ISA balance, preserving the tax shield across generations.
How Bank Savings Interest Is Taxed in the UK (2026/27)
In the United Kingdom, savings interest paid by commercial banks, building societies, and peer-to-peer lending platforms is classified as taxable income under Chapter 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). Since April 2016, UK financial institutions pay all interest gross without automatically deducting tax at source.
Whether you owe tax depends on your overall taxable income across the tax year and the statutory Personal Savings Allowance (PSA) legislated under Section 12 of the Income Tax Act 2007 (ITA 2007).
The £5,000 Starting Rate for Savings
Under Section 12 of the Income Tax Act 2007, low earners can earn up to £5,000 in savings interest completely tax-free. If your total non-savings income (such as employment wages or state pensions) is less than £17,570, you qualify for this starting rate. Every £1 of non-savings earnings above your £12,570 Personal Allowance reduces your £5,000 starting rate band by £1.
Joint Savings Accounts & Tax-Free NS&I Premium Bonds
Under Section 836 of the Income Tax Act 2007, interest generated on joint bank and building society accounts held by spouses or civil partners is legally deemed to be split equally (50:50) for tax purposes. Each partner can apply their respective £1,000 or £500 Personal Savings Allowance against their half of the interest.
For Additional Rate taxpayers who receive £0 Personal Savings Allowance, National Savings and Investments (NS&I) Premium Bonds represent a statutory alternative. Under Section 771 of ITTOIA 2005, all Premium Bond prize winnings are 100% legally exempt from UK Income Tax and Capital Gains Tax, with a maximum investment limit of £50,000 per person.
Frequently Asked Questions: UK Savings Interest Tax
Clear answers based on official HMRC rules and statutory guidance.
Authored and verified by UK tax specialists in accordance with the Income Tax Act 2007 (Section 12), Income Tax (Trading and Other Income) Act 2005 (Chapter 2), and Taxes Management Act 1970. Calculations reflect the 2026/27 tax year.
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Choose the income type and whether it is inside a valid ISA or pension wrapper. A selected tax-band illustration does not calculate every interaction with your other income.
The starting rate for savings, Personal Savings Allowance and dividend allowance have different rules. Selling an investment can create a capital gain; withdrawing your own capital is not automatically taxable income.
Check the rules for your circumstances
Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.