The UK Personal Savings Allowance Explained: £1,000 Basic, £500 Higher, £0 Additional
The UK Personal Savings Allowance lets basic-rate taxpayers earn £1,000 of interest tax-free, higher-rate taxpayers £500, and additional-rate taxpayers £0 (HMRC). It sits on top of a separate £5,000 starting rate for savings that tapers to zero above £17,570 of other income.
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Open calculatorWhat the Personal Savings Allowance is
You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you're in (gov.uk). That amount is called the Personal Savings Allowance (PSA).
Your starting rate for savings is a maximum of £5,000 (gov.uk). The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be (gov.uk).
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The allowance by tax band
The PSA amount depends on the Income Tax band the saver falls into:
An additional-rate taxpayer therefore pays Income Tax on every pound of taxable interest, at the additional rate.
The starting rate for savings
Your starting rate for savings is a maximum of £5,000 (gov.uk). You may also get up to £5,000 of interest and not have to pay tax on it (gov.uk).
The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be (gov.uk). Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1 (gov.uk).
The starting rate closes off completely once other income reaches a defined level. You're not eligible for the starting rate for savings if your other income is £17,570 or more (gov.uk).
The HMRC worked example
HMRC provides a worked example showing exactly how the starting rate tapers against wages. In the example the saver has modest wages and a small amount of interest:
- You earn £16,000 of wages and get £200 interest on your savings (gov.uk).
- Your Personal Allowance is £12,570 (gov.uk).
- The remaining £3,430 of your wages (£16,000 minus £12,570) reduces your starting rate for savings by £3,430 (gov.uk).
- Your remaining starting rate for savings is £1,570 (£5,000 minus £3,430) (gov.uk).
The £200 of interest (gov.uk) is well below the remaining £1,570 starting rate (gov.uk) that this saver keeps, and the £1,000 basic-rate PSA (gov.uk) sits on top of that.
ISAs and NS&I
Savings in tax-free accounts like Individual Savings Accounts (ISAs) and some National Savings and Investments accounts do not count towards your allowance (gov.uk). Interest earned inside a cash ISA therefore does not consume any of the £1,000 basic-rate PSA (gov.uk) or the £500 higher-rate PSA (gov.uk).
Self Assessment and reclaims
Two administrative rules matter for anyone whose savings interest is meaningful:
You need to register for Self Assessment if your income from savings and investments is over £10,000 (gov.uk).
You must reclaim your tax within 4 years of the end of the relevant tax year (gov.uk).
A note on scope
This page covers the published HMRC rules: the £1,000 basic-rate PSA (gov.uk), the £500 higher-rate PSA (gov.uk), the £0 additional-rate PSA (gov.uk), the £5,000 starting rate for savings (gov.uk), the £17,570 income cut-off for the starting rate (gov.uk), the £10,000 Self Assessment threshold for savings and investment income (gov.uk), and the 4-year reclaim window (gov.uk).
UK Calculator provides information and tools, not regulated tax advice. Anyone with a mix of savings, dividend and other investment income should consult a chartered tax adviser to work through how the allowances interact.
Frequently asked questions
What is the Personal Savings Allowance?
It's the amount of savings interest you can earn each tax year without paying Income Tax on it — up to £1,000 depending on your Income Tax band (gov.uk).
How much is the PSA for a higher-rate taxpayer?
£500 (gov.uk).
Does an additional-rate taxpayer get any PSA?
No. Additional rate: £0 (gov.uk).
What is the starting rate for savings?
A separate relief of up to £5,000 of tax-free interest (gov.uk) that tapers £1-for-£1 against other income above the Personal Allowance (gov.uk) and closes off entirely when other income reaches £17,570 (gov.uk).
Do ISA and NS&I accounts eat into the PSA?
No. Savings in tax-free accounts like Individual Savings Accounts (ISAs) and some National Savings and Investments accounts do not count towards your allowance (gov.uk).
When do I need to register for Self Assessment?
If your income from savings and investments is over £10,000 (gov.uk).
How long do I have to reclaim over-collected tax on savings interest?
Four years from the end of the relevant tax year (gov.uk).
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