Savings tax rises to 24% from April 2027: who pays more and what savers can do

Published · Updated · By Money Engine

A savings passbook and statement beside a calculator on a table.

Helen is a school business manager in Swansea. She earns £42,000 a year and keeps her rainy-day money in an ordinary easy-access account, which paid her £1,800 of interest this year. She's never really thought about tax on it. From April 2027 she may want to.

Helen is an illustrative example, not a real person. Her figures are worked out from the published rates, and this is illustration only, not financial advice.

What the Budget changed

In the Budget on 28 October 2026, the government said it will raise the income tax rates on savings interest by 2 percentage points. From 6 April 2027 the savings basic rate will be 24%, the higher rate 44% and the additional rate 49% (Budget 2026, personal taxation). It's due to be legislated in Finance Bill 2026-27, so it isn't law yet and could change on the way through Parliament (overview of tax legislation and rates).

There's a detail that's easy to miss. Budget 2025 had already announced a 2 point rise from April 2027, to 22%, 42% and 47%. This Budget adds a further 2 points from the same date (Budget 2026, making fair choices on revenue raising). Compared with the 20%, 40% and 45% savers pay in 2026 to 2027, that's a rise of 4 points (HMRC rates and allowances, Annex A).

The new rates apply across the UK. Scotland and Wales set their own rates on wages and pensions, but GOV.UK confirms that Scottish taxpayers and Welsh taxpayers pay the same tax as the rest of the UK on savings interest. So Helen in Swansea faces the same savings rates as someone in Leeds or Glasgow.

For a wider look at everything else in the Budget, see our Budget 2026 explainer.

Who doesn't pay more

The rates only bite on interest that's actually taxable. A lot of interest isn't, and the Budget doesn't change that. The Treasury's costing for this measure leaves out interest covered by the Personal Allowance, the Personal Savings Allowance and the starting rate for savings, and ISA returns (Budget 2026 policy costings).

Here's what each of those covers, using the GOV.UK rules on tax-free interest:

  • Personal Allowance. If your wages, pension or other income don't use up your £12,570 Personal Allowance, what's left covers interest.
  • Starting rate for savings. If your other taxable income is under £17,570, you can get up to £5,000 of interest tax-free. Every £1 of other income above the Personal Allowance cuts that £5,000 by £1. The limit stays at £5,000 in 2027 to 2028 (Annex A).
  • Personal Savings Allowance. Basic rate taxpayers get £1,000 of interest tax-free, higher rate taxpayers £500 and additional rate taxpayers nothing. Those figures are the same in 2027 to 2028 (Annex A).
  • ISAs. Interest inside an ISA isn't taxed, and that doesn't change.

The government says 84% of income tax payers won't be affected by the savings and property income rises (Budget 2026, making fair choices on revenue raising).

And the cash ISA limit isn't being cut after all. The Budget scrapped the planned £12,000 cap for under-65s, so the cash ISA limit stays at £20,000 a year (Budget 2026, personal taxation; our Budget explainer).

Helen's numbers

Helen's £42,000 salary plus £1,800 of interest comes to £43,800, which keeps her in the basic rate band. Her salary is well above £17,570, so the starting rate for savings doesn't help her. Her Personal Savings Allowance covers the first £1,000 of interest, which leaves £800 to tax.

  • 2026 to 2027, at 20%: £160.
  • 2027 to 2028 under the Budget 2025 plan, at 22%: £176.
  • 2027 to 2028 after this Budget, at 24%: £192.

If her interest stays the same, she'll pay £32 a year more than now, of which £16 is down to this Budget.

Now change one thing at a time:

  • If Helen's interest were £1,000 or less, she'd pay nothing before or after April 2027.
  • If the same £1,800 were earned inside a cash ISA, she'd pay nothing on it.
  • If she were promoted to £55,000, she'd be a higher rate taxpayer. Her allowance would drop to £500, leaving £1,300 taxable. That's £520 at 40% now and £572 at 44% from April 2027, a rise of £52.

So the people who pay more are those whose interest goes beyond their allowances and sits outside an ISA. The bigger the taxable slice, the bigger the rise.

What savers can do

None of this is advice, and what suits you depends on your own circumstances. These are the things worth understanding before April.

Use your ISA allowance. You can put up to £20,000 a year into ISAs, and interest inside them isn't taxed (GOV.UK ISAs).

Know how joint accounts are taxed. Each person has their own allowances, and HMRC splits interest on a joint account equally between the account holders unless you tell it otherwise (GOV.UK tax on savings interest). Couples sometimes look at whose name savings are held in, given one may have more allowance spare than the other.

Think about pensions alongside savings. Pension contributions get tax relief, with the provider or your employer usually applying it for you (GOV.UK pension tax relief).

Watch the timing. The new rates are for the 2027 to 2028 tax year, which starts on 6 April 2027. Banks tell HMRC about the interest they paid you in each tax year, so it matters when interest is actually paid. If you have a fixed-term account, check with the provider when it pays out.

Run your own numbers. Our compound interest calculator shows how much interest your savings could earn over time, so you can see whether you're likely to go past your allowance. If you're not sure whether you're a basic or higher rate taxpayer, the take-home pay calculator shows where your salary falls.

This article is general information based on the Budget 2026 documents published on 28 October 2026 and GOV.UK guidance checked on 2 November 2026. Helen is an illustration only and this isn't financial advice. Money Engine isn't authorised by the FCA. The new savings rates still need to pass through Finance Bill 2026-27 and may change.

Sources

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