Personal Savings Allowance

The PSA lets basic-rate payers earn £1,000/yr in savings interest tax-free. Higher rate £500. Additional rate £0.

Updated May 2026, using HMRC 2026/27 rates and current ONS / gov.uk figures.

Savings interest above your PSA is taxed at your marginal rate (20/40/45%). Move excess savings into ISAs to avoid the tax bill entirely.

Worked examples

Basic rate payer with £25k at 4%: £1,000 interest = exactly at PSA. £0 tax.

Higher rate payer with £25k at 4%: £1,000 interest. PSA covers £500. £500 taxed at 40% = £200 tax.

Additional rate payer with £25k at 4%: £400 tax (£1,000 × 45%).

Sources: HMRC PSA · retrieved 2026-05-12.

Frequently asked questions

Does the PSA cover bond interest?

Yes — covers most savings interest including bonds, savings accounts, and gilt income.

Are ISAs covered by the PSA?

ISAs are tax-free regardless — they don't use your PSA.

How is the PSA reported?

Banks report your interest to HMRC; PAYE codes adjust. For self-assessment, you declare it on the SA100.