From 6 April 2027, interest on savings above your tax-free allowances will be taxed at 24% for basic-rate taxpayers, 44% for higher-rate and 49% for additional-rate, after the Chancellor added a further two percentage points in the Autumn Budget on 28 October 2026. Today those rates are 20%, 40% and 45%. For a basic-rate taxpayer with £1,000 of taxable interest, the bill rises from £200 to £240 a year; a higher-rate saver with £50,000 earning 4.5% pays £70 more.
The headlines said "savings tax up". What most people actually want to know is simpler: will I pay more, and how much? Below we run the numbers for five savers, explain the allowances that mean most people still pay nothing, and show the one move that shelters your interest completely.
What changed in Budget 2026
Savings tax has now moved twice in a year. In November 2025, the government announced that rates on savings income would rise by two points to 22%, 42% and 47% from April 2027. In the Autumn Budget on 28 October 2026, it added another two points on savings and property income. The result, from 6 April 2027:
| Taxpayer band | 2026/27 (now) | Planned in Nov 2025 | From 6 April 2027 |
|---|---|---|---|
| Basic rate | 20% | 22% | 24% |
| Higher rate | 40% | 42% | 44% |
| Additional rate | 45% | 47% | 49% |
Two things did not change. The Personal Savings Allowance stays at £1,000 for basic-rate taxpayers, £500 for higher-rate and £0 for additional-rate. And the planned cut to the cash ISA limit, from £20,000 to £12,000 for under-65s, was dropped: savers of all ages can keep putting up to £20,000 a year into cash ISAs. (If you read our earlier piece on the £12,000 cash ISA cap, that plan is no longer going ahead.) For the rest of the Budget, see Budget 2026: what it means for you.
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Who pays nothing at all
Before the numbers, the good news. You only pay tax on interest above your allowances, and there are three of them:
- Personal Allowance: the first £12,570 of all income is tax-free.
- Starting rate for savings: up to £5,000 of interest can be tax-free if your other income is below £17,570. Every £1 of other income above £12,570 reduces it by £1.
- Personal Savings Allowance: £1,000 (basic), £500 (higher), £0 (additional).
That is why the Chancellor said 88% of people will pay no more tax on their savings. A basic-rate taxpayer would need roughly £22,000 in an account paying 4.5% before interest passes £1,000.
Five savers, calculated
These are illustrative examples assuming 4.5% interest for the whole year (4% for the first saver) and savings held outside an ISA. Real rates vary and change over time.
| Saver | Interest | Taxable | Tax now | Tax from Apr 2027 | Extra a year |
|---|---|---|---|---|---|
| Basic rate, £15,000 at 4% | £600 | £0 | £0 | £0 | £0 |
| Basic rate, £30,000 | £1,350 | £350 | £70 | £84 | £14 |
| Basic rate, £5,000 taxable interest | – | £5,000 | £1,000 | £1,200 | £200 |
| Higher rate, £50,000 | £2,250 | £1,750 | £700 | £770 | £70 |
| Higher rate, £100,000 | £4,500 | £4,000 | £1,600 | £1,760 | £160 |
Taxable = interest minus Personal Savings Allowance. "Tax now" uses 2026/27 rates (20%/40%); "from April 2027" uses 24%/44%. Starting rate for savings ignored, as these savers are assumed to have other income above £17,570.
Extra tax per year, by taxable interest
The four-point rise costs the same £4 for every £100 of taxable interest, whichever band you are in. Small for most savers, but it lands on exactly the money many women keep for emergencies, and it arrives just as the Bank of England may move rates again (see our 5 November explainer). Higher rates mean more interest, which means more of it crosses your allowance.
"Every £100 of taxable interest now costs £4 more. The money most likely to cross that line is your emergency fund."
Where your savings live now matters
A tax change like this rewards households that know exactly which pot does which job: what sits in an ISA, what is your buffer, what pays the bills. Most of us have money scattered across accounts with no plan for any of it.
The Matriarch's Money Reset — Step III: Own the System helps you:
- Map every account and give each pot a clear job: bills, buffer, goals
- Build a buffer system and decide where it should sit before April 2027
- Set up a bills calendar so saving happens automatically, not with leftovers
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Your five-step checklist before 6 April 2027
- Add up last year's interest. Banks show annual interest in your app or on statements. Compare it with your allowance (£1,000 or £500).
- Check your band. Interest counts as income. A pay rise or bonus could push you into higher rate, halving your allowance to £500.
- Use the cash ISA. Interest inside an ISA is tax-free and does not use your allowance. The £20,000 limit stays, and the 2026/27 allowance runs until 5 April 2027.
- Look at joint accounts. Interest on joint accounts is usually split equally, so each person uses their own allowance.
- Watch for HMRC letters. HMRC usually collects savings tax by adjusting your tax code or through Self Assessment. Check any code change carefully.
If you are unsure how this applies to you, MoneyHelper offers free, impartial guidance, and Citizens Advice can help if tax bills are adding to money worries. If budget news is weighing on you, talking to someone you trust can make it feel more manageable. And if you are remortgaging soon, our look at UK mortgage rates may help you decide whether savings or overpayments work harder.
FAQ
When does the savings tax rise start?
The new 24%, 44% and 49% rates apply to savings income from 6 April 2027, the start of the 2027/28 tax year. Interest earned before then is taxed at today's 20%, 40% and 45%.
Is the Personal Savings Allowance changing?
No. It remains £1,000 for basic-rate taxpayers, £500 for higher-rate and £0 for additional-rate taxpayers.
Is interest in a cash ISA taxed?
No. Interest earned inside a cash ISA is tax-free, and the planned cut to £12,000 for under-65s will not happen, so the limit stays at £20,000 a year.
Sources
- GOV.UK: Changes to tax rates for property, savings and dividend income (November 2025)
- GOV.UK: Tax on savings interest – how much is tax-free
- Which?: Autumn Budget 2026 – what changes were announced (October 2026)
- MoneySavingExpert: Budget 2026 reaction and analysis (October 2026)
- Professional Adviser: Savings income tax rate to rise to 44% for higher earners
- MoneyHelper (free, government-backed guidance)
All rates apply to the United Kingdom tax years stated. Saver examples are illustrative calculations.
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Educational content only. Not personalised financial advice.