YF Accounting9 min read
From 6 April 2027 (the 2027/28 tax year), interest on savings held outside an ISA will be taxed at 24%, 44% or 49% rather than today’s 20%, 40% or 45%, once you go past your Personal Savings Allowance of £1,000 for basic rate taxpayers or £500 for higher rate taxpayers. The Budget on 28 October 2026 added two percentage points to the 22%, 42% and 47% savings rates announced last November, while leaving the allowance, the starting rate for savings and the £20,000 ISA limit exactly where they are.
Most savers will still pay nothing, because the allowance covers the first £1,000 or £500 of interest each year. If you hold more than roughly £25,000 outside an ISA, or you are a higher or additional rate taxpayer, the rise is real money, and there are 17 months to arrange things before it starts. Here is who pays more, by how much, how HMRC collects it, and six legitimate ways to keep the bill down. Our full Budget 2026 summary covers the rest of the announcements.
What changed and when
Last November’s Budget announced that savings income would get its own, higher set of rates from April 2027: 22%, 42% and 47%. The Budget on 28 October 2026 raised each of those by a further two points. HMRC’s Overview of Tax Legislation and Rates confirms the savings basic rate will be 24%, the savings higher rate 44% and the savings additional rate 49% for 2027/28, with effect from 6 April 2027. The same rates will apply to rental profits, which we cover in our guide to the landlord tax rise. Unlike the property rates, the savings rates apply across the whole UK, including Scotland.
| Item | 2026/27 | From 6 April 2027 |
|---|---|---|
| Savings interest, basic rate taxpayer | 20% | 24% |
| Savings interest, higher rate taxpayer | 40% | 44% |
| Savings interest, additional rate taxpayer | 45% | 49% |
| Personal Savings Allowance (basic / higher / additional) | £1,000 / £500 / £0 | No change |
| Starting rate for savings | 0% on up to £5,000 | No change |
| ISA allowance | £20,000 | £20,000 |
| Salary, self-employed profit and pensions | 20% / 40% / 45% | No change |
| Dividends | 10.75% / 35.75% / 39.35% | No change |
One piece of good news sits alongside the rise. Last November the government planned to cut the cash ISA limit to £12,000 for anyone under 65 from April 2027. The Budget reversed that, so the full £20,000 a year can still go into cash, which matters more now that the rate on interest outside an ISA is going up.
Who actually pays more
The new rates only bite once your interest goes past the Personal Savings Allowance, so the first question is how much you hold outside an ISA. At an interest rate of 4%, a basic rate taxpayer uses up the £1,000 allowance with about £25,000 of savings, and a higher rate taxpayer uses up the £500 allowance with about £12,500. Additional rate taxpayers, with income over £125,140, have no allowance at all and will pay 49% on every pound of interest from April 2027.
Interest means anything paid by a bank or building society account, a fixed-rate bond, NS&I products that pay interest, peer-to-peer lending, and interest your own company pays you on money you have lent it. ISA interest, Premium Bond prizes and the interest inside a pension are not taxed at all, and nothing changes there.
There is a trap in fixed-rate bonds. Interest is taxed in the year you can get at it, so a two or three year bond that only pays out at maturity drops the whole term’s interest into one tax year. That can carry a basic rate saver well past the £1,000 allowance, or push someone just under £50,270 into the higher rate, in the very year the rates go up. A bond that pays interest annually spreads it across the allowances of several years instead.
At the other end, people with little other income are protected twice over. If your income apart from savings is under £17,570, the starting rate for savings taxes up to £5,000 of interest at 0% on top of the Personal Allowance and the Personal Savings Allowance. Someone with no other income at all can receive £18,570 of interest in 2027/28 without paying a penny, exactly as now.
What it costs: worked examples
| Saver | Interest in the year | Taxable after allowance | Tax in 2026/27 | Tax in 2027/28 | Extra |
|---|---|---|---|---|---|
| Basic rate taxpayer | £3,000 | £2,000 | £400 | £480 | £80 |
| Higher rate taxpayer | £3,000 | £2,500 | £1,000 | £1,100 | £100 |
| Higher rate taxpayer | £8,000 | £7,500 | £3,000 | £3,300 | £300 |
| Additional rate taxpayer | £10,000 | £10,000 | £4,500 | £4,900 | £400 |
The pattern is the same as for landlords: £4 more tax for every £100 of taxable interest. For a basic rate saver that is modest. For a higher rate taxpayer sitting on a large cash balance, perhaps after a house sale or an inheritance, £8,000 of interest already costs £3,000 in tax and will cost £3,300 from April 2027, which is the point at which an ISA, a spouse’s allowance or a pension contribution starts to pay for itself.
How HMRC collects it
Banks and building societies pay interest without deducting tax, then report what they paid you to HMRC after the end of each tax year. If you are employed or draw a pension, HMRC usually collects the tax by adjusting your tax code, using last year’s interest as an estimate of this year’s. If the estimate looks wrong, you can ask HMRC to change it rather than wait for a refund. If you already file a Self Assessment tax return, the interest goes on the return and the tax is paid with the rest of your bill, so tax on 2027/28 interest is due by 31 January 2029. If your bank reports more than £10,000 of interest in a year, HMRC will send you a notice to file a return even if you have never filed one before.
Two things to watch in 2027. Tax codes for 2027/28 will be built from 2026/27 interest at the old rates, so some people will underpay through the year and get a bill later. And because the rates change on 6 April 2027, interest credited in March 2027 is taxed at 20% or 40% while the same interest credited a few weeks later is taxed at 24% or 44%. Where a bond lets you choose, the payment date matters.
A note for company directors
If your company owes you money and pays you interest on it, that interest is savings income in your hands and will be taxed at 24%, 44% or 49% from April 2027, with the company deducting tax at source and reporting it to HMRC each quarter. Salary is unaffected by this change and dividends stay at 10.75%, 35.75% and 39.35% with the £500 dividend allowance, so the balance between interest, salary and dividends is worth a fresh look. Our guide to salary versus dividends covers the main choice, and the director’s loan account guide explains how money owed between you and the company is treated.
Six ways to keep the bill down
- Fill your ISA every year. £20,000 can go in before 5 April 2027 and another £20,000 from 6 April 2027, and the interest is tax free for as long as it stays there. A couple can shelter £80,000 across those two tax years.
- Use Premium Bonds for part of your cash. Prizes are tax free and you can hold up to £50,000 per person. The expected return is a prize rate rather than guaranteed interest, so it suits money you can afford to see earn nothing in a quiet month.
- Share savings with your spouse or civil partner. Gifts between spouses are free of tax, and you each get your own Personal Savings Allowance. If one of you pays 44% and the other 24%, or has little other income and can use the £5,000 starting rate, moving cash across can cut the tax on the same interest to a fraction of the bill.
- Stay a basic rate taxpayer with a pension contribution. Gross personal pension contributions extend your basic rate band. If your total income sits just over £50,270, a contribution that brings you back under the line restores the £1,000 allowance and the 24% rate on everything above it, as well as giving you tax relief on the contribution itself.
- Choose when fixed bonds pay out. Annual interest uses an allowance every year; interest paid only at maturity lands in one year. If you are locking money away for two or three years, pick the option that keeps you under the allowance each year.
- Check your tax code and claim refunds. HMRC’s estimate of your interest can be out of date after you move money into an ISA or spend a lump sum. A quick check of the code each April, and a claim where you have overpaid, is money back in your pocket.
Interest, dividends and capital gains are all taxed differently, so if you hold a large cash balance long term it is worth asking a regulated financial adviser whether cash is the right home for all of it. We can run the tax side of that conversation and work alongside your adviser.
Where YF Accounting fits in
Savings interest rarely needs an accountant on its own, but it is often the thing that tips someone into Self Assessment for the first time, or into the higher rate without noticing. Our personal tax and Self Assessment service is a fixed fee from £35 a month, or £500 for a one-off return, and it covers interest, dividends, rental income and the tax code checks that stop HMRC collecting the wrong amount. Full details are on our pricing page.
You deal with one person (me, Yoni), support is unlimited rather than billed by the hour, and we tell you about changes like this one before they arrive. If you would like to know what the 2027 rates mean for your savings, and whether an ISA, a pension contribution or a transfer to your partner would save more, Book a free call or ring 0161 531 0959.
Frequently asked questions
Does the new rate apply to interest in my ISA?
No. Interest earned inside a cash ISA or a stocks and shares ISA stays completely tax free, and the £20,000 annual limit is unchanged for 2027/28 after the Budget dropped the planned cut to £12,000. The new 24%, 44% and 49% rates only apply to interest outside an ISA that goes above your Personal Savings Allowance.
Is the Personal Savings Allowance changing in April 2027?
No. HMRC’s rates and allowances table for 2027/28 keeps it at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and nil for additional rate taxpayers. The starting rate for savings also stays at 0% on up to £5,000 of interest for people with other income below £17,570. Only the rate charged on interest above those allowances goes up.
I am a basic rate taxpayer with about £600 of interest a year. Do I need to do anything?
No. £600 sits inside your £1,000 Personal Savings Allowance, so there is no tax to pay now and none from April 2027. Keep an eye on it if you receive a lump sum or your fixed bond pays all its interest in one year, because the allowance applies per tax year, not per account.
I live in Scotland. Do the new savings rates apply to me?
Yes. Savings and dividend income are taxed under the UK-wide rates for everyone, including Scottish taxpayers, so the 24%, 44% and 49% savings rates apply in Scotland from 6 April 2027. Which band you fall into for savings purposes still depends on your total income measured against the UK thresholds of £50,270 and £125,140.
Do I need a tax return because of my savings, and what would YF Accounting charge?
If your bank reports more than £10,000 of interest in a tax year, HMRC will ask you to file a return. Below that, HMRC normally collects any tax through your tax code unless you already file for another reason, such as self-employment or rental income. Our personal tax service is a fixed fee from £35 a month or £500 for a one-off return, with unlimited support included. If you already have an accountant, switching takes one email from you. See the personal tax page for what is included, or book a free call.
Sources: HMRC, Budget 2026: Overview of Tax Legislation and Rates (paragraphs 1.1 and 2.5) and its Annex A rates and allowances, both published 28 October 2026; HMRC, technical note on the changes to tax rates for property, savings and dividend income; GOV.UK, Tax on savings interest. Figures checked on 29 October 2026. The 2027/28 rates still need to pass through the Finance Bill and may change before they take effect.
Founder of YF Accounting, a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.
Related reading
Landlord Tax Rise From April 2027: Rental Profits Taxed at 24%, 44% and 49%
Autumn Budget 2026: What It Means for Small Businesses, Directors and Landlords
What Triggers an HMRC Enquiry, and How Not to Be a TargetThis article is part of our Self Assessment guide. See the full topic for related reads.