Key takeaways
- From 6 April 2027 the savings basic rate is 22%, the savings higher rate 42% and the savings additional rate 47%, each 2 points above the rate for 2026 to 2027.
- On £50,000 of savings at 4%, a basic rate taxpayer's bill goes from £200 to £220 and a higher rate taxpayer's from £600 to £630. On £100,000 it goes from £600 to £660 and from £1,400 to £1,470.
- The increase is exactly 2% of your taxable interest, so £10,000 at 4% still costs a basic rate taxpayer nothing: the £400 sits inside a £1,000 allowance.
- HMRC expects 3.8 million people, 9% of taxpayers, to pay more by 2029 to 2030, and 54% of the affected population is aged 55 and above against 39% of UK adults.
- The measure raises £55 million in 2027 to 2028 and £525 million the year after, because savings tax is usually collected through a tax code a year or two in arrears.
The tax on savings interest in 2027 goes up 2 points at every band
You've heard that savings tax is rising in April 2027 and you want your own number. Here it is, before the explanation.
The tax on savings interest from April 2027 is 22% at the basic rate, 42% at the higher rate and 47% at the additional rate. Each one is 2 percentage points above the 2026 to 2027 rate of 20%, 40% and 45%. Nothing else in the calculation moves.
The personal savings allowance stays at £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and £0 for an additional rate taxpayer. The starting rate for savings stays at £5,000. Interest inside an ISA stays outside the tax system entirely.
None of this is a proposal. Finance Act 2026 received Royal Assent on 18 March 2026. Its section 5 says that for the 2027 to 2028 tax year "the savings basic rate is 22%", "the savings higher rate is 42%" and "the savings additional rate is 47%". HM Treasury said the same thing in plainer words in November 2025: "Tax on savings income will increase by 2 percentage points across all bands."
It applies wherever you live. The Budget document is explicit: "The changes to dividend and savings income rates will apply UK-wide as these rates are reserved." GOV.UK tells Scottish taxpayers they "pay the same tax as the rest of the UK on dividends and savings interest". Scottish rates on pay and pensions differ; the savings rates here don't.
What you'd pay on £10,000 to £100,000 of savings
The table runs four balances at a flat 4% through the three tax bands, in the year before the change and the year after it. Put another way, it sets the tax on savings interest for 2027 to 2028 beside the same sum for 2026 to 2027. It assumes interest paid outside an ISA, one account holder, no dividend income, and the England, Wales and Northern Ireland bands. The Bank of England put the effective rate on individuals' new time deposits at 4.24% in August 2026. So 4% sits a little below that.
| Savings | Your band | Taxable interest | Tax 2026 to 2027 | Tax 2027 to 2028 | Extra |
|---|---|---|---|---|---|
| £10,000 | Basic | £0 | £0 | £0 | £0 |
| £10,000 | Higher | £0 | £0 | £0 | £0 |
| £10,000 | Additional | £400 | £180 | £188 | £8 |
| £25,000 | Basic | £0 | £0 | £0 | £0 |
| £25,000 | Higher | £500 | £200 | £210 | £10 |
| £25,000 | Additional | £1,000 | £450 | £470 | £20 |
| £50,000 | Basic | £1,000 | £200 | £220 | £20 |
| £50,000 | Higher | £1,500 | £600 | £630 | £30 |
| £50,000 | Additional | £2,000 | £900 | £940 | £40 |
| £100,000 | Basic | £3,000 | £600 | £660 | £60 |
| £100,000 | Higher | £3,500 | £1,400 | £1,470 | £70 |
| £100,000 | Additional | £4,000 | £1,800 | £1,880 | £80 |
Read the top three rows first. A basic or higher rate taxpayer with £10,000 saved pays nothing in either year, because £400 of interest fits inside a £1,000 or £500 allowance. An additional rate taxpayer with the same £10,000 pays £180 now and £188 from April 2027, because they get no allowance at all. That £8 is the smallest increase anyone in the table pays, and it lands on the highest earner in it.
At the other end, £100,000 at 4% throws off £4,000 of interest. From April 2027 that costs a basic rate taxpayer £660 against £600 now, a higher rate taxpayer £1,470 against £1,400, and an additional rate taxpayer £1,880 against £1,800.
The increase is exactly £2 for every £100 of taxable interest
Every figure in the last column is 2% of the taxable interest beside it. £1,000 of taxable interest costs £20 more. £3,500 costs £70 more. That's the whole arithmetic, and it holds at every band, because all three rates moved by the same 2 points.
So the number that decides your increase isn't your balance and isn't your rate. It's the slice of interest sitting above your allowance. Two people with the same £50,000 can face different bills, because the allowance is spent once across everything you hold. HMRC "will add together the interest from all your savings accounts to work out the total amount of interest you earned". A joint account divides it, since HMRC "will split the interest earned equally between the account holders". Premium Bonds sit outside that sum altogether, because prizes are not interest, though the premium bonds prize rate NS&I quotes is an average rather than what a typical holder receives.
Your allowance decides whether you pay anything at all
The personal savings allowance is the first thing to check, and it steps rather than tapers. GOV.UK's table is three lines: basic rate £1,000, higher rate £500, additional rate £0. They are the same amounts the allowance started with in April 2016.
At 4%, £1,000 of interest is what £25,000 of savings produces. So a basic rate taxpayer's allowance covers roughly the first £25,000 of cash, a higher rate taxpayer's covers roughly £12,500, and an additional rate taxpayer's covers nothing. That is why the £10,000 and £25,000 rows are mostly zeros and the £100,000 rows are not.
The band that sets the allowance is worked out after the interest is added in. GOV.UK puts the test plainly: "To work out your tax band, add all the interest you've earned to your other income." That matters at £50,270, where the allowance halves the moment anything is charged at 40%, and again at £125,140, where it disappears. Those steps sit inside the order income is taxed in, which the UK dividend tax guide works through pound by pound.
One more change lands on the same day, and it is easy to miss. HM Treasury states it in one line: "The income tax ordering rules will be changed from April 2027 so that the Personal Allowance will be deducted against employment, trading or pension income first." Today the Income Tax Act 2007 says allowances are deducted "in the way which will result in the greatest reduction in the taxpayer's liability to income tax". HM Treasury adds that this "does not impact use of specific structural allowances, including the dividend allowance, personal savings allowance and property allowance". What goes away is the free choice about where the personal allowance lands.
A low earner can still take £6,000 of interest tax free
The starting rate for savings is a 0% band worth up to £5,000, and it sits on top of the personal allowance rather than replacing it. GOV.UK: "If your other taxable income (not including savings interest or dividends) is less than £17,570, you can get the starter rate for savings. This means you can earn up to £5,000 of interest and not have to pay tax on it."
Stack it with the £1,000 personal savings allowance and someone whose only other income is a £12,570 pension can take £6,000 of interest before any tax is due. At 4%, that's £150,000 of savings. The April 2027 rise doesn't reach them, because none of their interest is charged at any of the three rates.
It erodes quickly, though. "Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1." GOV.UK's own example uses £16,000 of wages: £12,570 goes against the personal allowance, and the remaining £3,430 knocks the starting rate down to £1,570.
Run £100,000 of savings through that. The interest is £4,000. £1,570 sits in the starting rate and £1,000 in the personal savings allowance, leaving £1,430 taxable. At 20% that's £286 in 2026 to 2027. At 22% it's £314.60 in 2027 to 2028, an increase of £28.60. Finance Act 2026 also freezes the £5,000 starting rate limit for every year through to 2030 to 2031, so this erosion carries on as wages rise.
The cash ISA limit falls to £12,000 on the same day
6 April 2027 carries a second change for savers. The Budget document is specific: "From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000." Savers over the age of 65 keep the full £20,000 in cash. The cash ISA rules over 65 turn on your age at the end of the tax year, so the full limit covers the whole year containing your 65th birthday.
The two changes point the same way for anyone under 65 who fills a cash ISA each year. At 4%, a £20,000 cash subscription shelters £800 of interest and a £12,000 one shelters £480. The other £320 has to sit somewhere, and if that somewhere is an ordinary savings account it meets the new rates.
The overall £20,000 ISA allowance doesn't change, and nor does the treatment of money already inside one. HM Treasury's line is unchanged: "All interest received on assets held within ISAs is entirely tax free." What changes is how much new money can go into the cash version each year.
Most of the money lands a year late
The Budget scorecard puts the savings measure at £55 million in 2027 to 2028 and £525 million in 2028 to 2029. A rate rise that starts on the first day of 2027 to 2028 and collects about a tenth of its money that year looks odd, until you read how the tax is collected.
For most people it isn't collected in the year it arises. GOV.UK works an example: tax on interest earned in 2025 to 2026 appears in a calculation sent during 2026 to 2027. "The tax due is usually collected through your tax code in 2027 to 2028." Two tax years after the interest was paid.
HMRC's impact note puts the same point in one line: "most taxpayers are not liable to tax on their savings income and the majority of those who do have the tax deducted automatically via tax recoding". Self Assessment is the exception. Anyone whose bank reports "more than £10,000 in savings interest" gets a notice to file a return, and pays on the Self Assessment timetable instead.
The practical version is simple. If your savings tax arrives through a tax code, the first year of the higher rate is likely to reach you as a changed code rather than a bill, and it may not reach you in 2027 at all. The yield then settles at £470 million in 2029 to 2030, which is roughly what a steady-state savings tax looks like. The £5 million booked for 2026 to 2027 can't be the rate rise, which doesn't start until 6 April 2027. The same scorecard line also covers holding the £5,000 starting rate limit still from April 2026, and that is what the early money is.
The objection: 9% of taxpayers, and tens of pounds each
The strongest case against treating any of this as important is that it's small and it's rare. HM Treasury states it flatly: "Over 90% of UK taxpayers do not pay savings tax." HMRC's impact note puts numbers on the rest. By 2029 to 2030, "3.8 million individuals (9% of taxpayers in 2029 to 2030), will face an increase in tax as a result of this measure".
The individual amounts are modest too. Nothing in the table above exceeds £80 a year. The savings measure is scored between £470 million and £525 million a year once it matures, against £2.2 billion in 2029 to 2030 for the property, dividend and savings changes together. Taken alone it is a small line in a large Budget.
Two things cut the other way. The first is who it lands on. HMRC records that 54% of the affected population is aged 55 and above against 39% of UK adults, and that people over State Pension age "are more likely to have taxable savings income". The second is the direction of travel. The footnote behind that 90% figure dates it: savings tax was paid by 4% of taxpayers in 2022 to 2023, and is projected at 9% in 2029 to 2030. The affected share more than doubles, while the allowance protecting it is the same £1,000 and £500 it was in April 2016.
What these figures cannot tell you
Start with the 4%. Every row in the table is an assumption about a rate, not a measurement of yours. The Bank of England's August 2026 figures show how wide the spread is: 4.24% on new time deposits, 3.41% on the stock of time deposits and 1.65% on the stock of sight deposits. Cash that's been sitting in an instant access account for years is probably nearer the bottom of that range than the top. The September 2026 quoted averages put easy access savings rates at 2.06%, against 4.35% on a one-year fixed bond.
At 1.65%, £100,000 produces £1,650 of interest. For a basic rate taxpayer that leaves £650 above the allowance, so the bill moves from £130 to £143. The rate rise costs £13 a year rather than £60. Halve the interest rate and you roughly halve the increase.
The other limitations are ordinary but real. These are single-person figures with no dividend income, and dividends stack above interest and change which band the interest falls in. They ignore trusts, children's accounts, foreign interest and anything that isn't pay, pension or interest. They also assume your other income stays where it is. The personal allowance and the higher rate threshold are held at £12,570 and £50,270 from April 2028 to April 2031, so the income tax threshold freeze may move you into a smaller allowance before the rate change touches you.
Scotland is a further gap. Scottish taxpayers pay UK rates on savings interest, but their salary and pension are taxed on a different band table, so working out which of the three savings rates applies takes both tables. Every band in this piece is the England, Wales and Northern Ireland one.
And a scorecard is a forecast, not a measurement. HMRC says of the £525 million and the rest: "The figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility." A certified costing is still a projection of how much interest people hold and where, not a count of anything that has happened.
What would change this arithmetic
A later Finance Act would, completely. Section 5 fixes the tax on savings interest for 2027 to 2028 and nothing beyond it, because, as HMRC's impact note records, the savings rates "are set by Parliament for each tax year". They sat at 20%, 40% and 45% from April 2017 until this change. A future Budget can move them again.
An uprated personal savings allowance would matter more than the rate for most of the people affected. Someone with £2,000 of interest and a £1,000 allowance pays £220 at the new basic rate. Doubling the allowance to £2,000 would remove all of it, which is 11 times what the 2 point rise costs that same saver. That allowance began at £1,000 and £500 in April 2016 and is still £1,000 and £500.
Interest rates are the other lever, and they move faster than tax law does. The same £100,000 leaves a basic rate taxpayer with a £660 bill at 4% and a £143 bill at 1.65%, which is a bigger swing than 2 points on the rate produces anywhere in the table.
The rate itself is settled. What isn't settled is how much of your interest reaches it. That turns on three numbers that move independently of any Budget: what your account pays, how much of your cash sits inside a wrapper, and whether your other income has crossed a band. Where to keep an emergency fund turns out to be a tax question as much as a liquidity one, and on 6 April 2027 the answer changes for anyone under 65 who has been filling a cash ISA. Budget 2026 added a further two percentage points to the savings rates on 28 October 2026, taking them to 24%, 44% and 49%, and what Budget 2026 will mean for me sets those against the tax on a salary at four incomes.