Do You Have to Declare Savings Interest on Self Assessment?
Interest from savings is easy to overlook.
It may arrive automatically in your bank account each month. You might have several savings accounts with different banks, fixed-term accounts or money sitting in an account earning interest throughout the year.
But savings interest can be taxable.
The important point is that you do not necessarily need to complete a Self Assessment tax return simply because you earned interest. How the tax is collected depends on the amount of interest, your other income and whether you already complete Self Assessment.
For the 2025/26 tax year, the Personal Savings Allowance can allow many taxpayers to receive some savings interest without paying Income Tax.
What is the Personal Savings Allowance?
Your Personal Savings Allowance determines how much savings interest you may be able to receive tax-free.
For 2025/26, the allowance is:
| Income Tax position | Personal Savings Allowance |
|---|---|
| Basic-rate taxpayer | £1,000 |
| Higher-rate taxpayer | £500 |
| Additional-rate taxpayer | £0 |
The allowance is based on your tax position, so your other income matters.
This means two people receiving exactly the same amount of bank interest could have different tax liabilities.
Example: basic-rate taxpayer
Suppose you earn a salary of £35,000 and receive £700 of savings interest during the tax year.
Assuming you remain a basic-rate taxpayer and are entitled to the full £1,000 Personal Savings Allowance, that £700 falls within the allowance.
There would therefore normally be no Income Tax to pay on that interest.
Now suppose you receive £1,400 instead.
The first £1,000 could fall within your Personal Savings Allowance, leaving £400 potentially taxable.
Your exact position still depends on your wider income and circumstances.
What if you’re a higher-rate taxpayer?
Higher-rate taxpayers normally receive a smaller £500 Personal Savings Allowance.
For example:
Savings interest: £1,200
Personal Savings Allowance: £500
That could leave £700 of taxable savings income.
The allowance itself is not a deduction from the amount banks report. It determines how much qualifying savings income can be taxed at 0%.
What about additional-rate taxpayers?
Additional-rate taxpayers do not receive a Personal Savings Allowance.
That means savings interest can potentially be taxable from the first pound.
This is one reason you should not assume that interest is tax-free simply because your bank paid it without deducting tax.
There is also a starting rate for savings
The Personal Savings Allowance is not the only potential tax relief for savings income.
Some people with relatively low levels of other income can also benefit from the starting rate for savings.
For 2025/26, the maximum starting-rate band is £5,000.
However, every £1 of other income above your Personal Allowance reduces the starting-rate band by £1. If your other income reaches £17,570 or more, you will not normally receive the starting rate for savings.
This can make the calculation more favourable for people with relatively low earnings or pension income.
Do banks deduct tax before paying interest?
Usually not.
Most banks and building societies pay savings interest gross, meaning without deducting Income Tax first.
HMRC says banks and building societies report interest information directly to it.
If you are employed or receive a pension and owe tax on savings interest, HMRC can often collect the tax by adjusting your PAYE tax code.
That means taxable savings interest does not automatically mean you need Self Assessment.
Do you need to put savings interest on your Self Assessment?
If you already complete a Self Assessment tax return, you should include the relevant savings income on your return.
HMRC’s guidance says that if you complete Self Assessment, you report savings interest through the return.
Do not simply leave it off because the interest falls within your Personal Savings Allowance.
The tax calculation needs the relevant income information to determine how the allowances and rates apply.
What if you don’t normally complete Self Assessment?
HMRC can often deal with savings interest without requiring a tax return.
Its guidance explains that where you are employed or receive a pension, HMRC will normally change your tax code to collect tax due on interest.
If you are not employed, do not receive a pension or do not complete Self Assessment, HMRC explains that it will tell you how the tax should be paid.
The position changes for particularly large amounts of savings and investment income.
HMRC’s current Self Assessment guidance says you must send a tax return if your income from savings, investments and dividends was £10,000 or more before tax.
What types of interest can be taxable?
Savings income can include interest from sources such as:
- Bank accounts
- Building society accounts
- Credit union accounts
- Certain investment products
- Government or corporate bonds
- Interest distributions from some funds
The treatment can vary according to the product.
So don’t assume that only an account explicitly called a “savings account” can produce savings income for tax purposes.
What about ISA interest?
Interest earned inside an Individual Savings Account (ISA) is generally tax-free.
HMRC states that you do not pay tax on interest, income or capital gains from investments held within an ISA.
This means ISA interest does not use up your Personal Savings Allowance in the same way as taxable savings outside an ISA.
For example, if you received:
Cash ISA interest: £900
Normal savings-account interest: £800
The £900 ISA interest would generally remain tax-free within the ISA.
The £800 outside the ISA would then be considered under the normal savings-income rules.
What about Premium Bonds?
Premium Bonds work differently from an ordinary savings account.
They do not pay conventional interest.
Instead, eligible Bonds are entered into monthly prize draws.
NS&I states that Premium Bonds prizes are tax-free.
They therefore do not operate like taxable bank interest for the Personal Savings Allowance.
What if you have several bank accounts?
You need to consider your total taxable savings interest, not each account independently.
For example:
| Account | Interest |
|---|---|
| Savings account A | £420 |
| Savings account B | £310 |
| Fixed saver | £390 |
| Total | £1,120 |
You cannot treat each account as being below £1,000 and therefore tax-free.
The relevant interest needs to be considered together.
For a basic-rate taxpayer entitled to the full £1,000 Personal Savings Allowance, £120 of the £1,120 could potentially fall outside the allowance.
Fixed-term savings can make this less obvious
Fixed-rate and fixed-term accounts can sometimes create confusion over when interest becomes taxable.
The answer can depend on when the interest is actually made available to you under the terms of the account.
For example, an account might:
- Pay interest annually
- Credit it monthly
- Pay everything at maturity
- Credit interest internally but restrict access until maturity
The tax year in which the interest is treated as arising can therefore matter, particularly with larger fixed-term deposits.
If a substantial amount of interest is involved, check the account terms and the tax treatment rather than simply dividing the total interest across the term yourself.
What if you have a joint savings account?
Joint accounts can also require attention.
HMRC generally treats interest from a jointly held account between spouses or civil partners as belonging to them equally for Income Tax purposes, unless specific circumstances alter that treatment.
For other jointly owned accounts, the beneficial ownership of the money and interest can matter.
So if a large savings balance is jointly held, don’t automatically allocate all the interest to whichever person happens to receive the bank statement.
Why has savings tax become more relevant?
Interest rates have meant that savers can generate meaningful amounts of interest without having exceptionally large cash balances.
For example, at a hypothetical interest rate of 4%:
£10,000 saved → £400 annual interest
£25,000 saved → £1,000 annual interest
£50,000 saved → £2,000 annual interest
That means someone with substantial cash savings outside an ISA could exceed their Personal Savings Allowance relatively easily.
This is particularly relevant for higher-rate taxpayers because their allowance is only £500.
Check the interest figure — not just the money entering your account
When preparing your tax information, don’t try to estimate your annual interest by scrolling through 12 months of bank transactions unless necessary.
Banks will often provide an annual interest statement or certificate showing the amount credited during the relevant period.
If you have several accounts, gather the information from each provider.
This reduces the chance of forgetting:
- An old savings account
- A fixed-rate account
- Interest from a joint account
- An account with another bank
- Interest paid when an account matured
Keep your savings records
It is sensible to retain:
- Annual interest statements
- Bank statements
- Savings certificates
- Fixed-term account information
- Details of joint ownership
- Information relating to foreign savings accounts
If HMRC’s information differs from your records, having the underlying documents makes the discrepancy much easier to investigate.
What about interest from overseas accounts?
Foreign savings income can have different reporting implications.
Do not assume that interest is outside UK tax simply because the account is held with an overseas bank.
UK residents may have UK tax obligations relating to foreign income, although the exact treatment depends on residence status, the nature of the income and the applicable rules.
Foreign income is an area where individual circumstances can materially change the answer, so it is worth getting advice if significant overseas savings are involved.
Savings tax changes from April 2027
There is also an upcoming change to be aware of.
The government has legislated separate Income Tax rates for savings income from 6 April 2027.
For taxpayers in England, Wales and Northern Ireland, the new savings rates are scheduled to be 22% basic, 42% higher and 47% additional from 2027/28.
Those rates do not apply to the 2025/26 Self Assessment return being prepared now.
It is important not to apply future tax rates to an earlier tax year.
Frequently Asked Questions
How much savings interest can I earn tax-free?
For 2025/26, the Personal Savings Allowance is up to £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. Some people with low other income may also benefit from the starting rate for savings.
Do I need Self Assessment if I earn more than £1,000 interest?
Not automatically. HMRC can often collect tax through PAYE where appropriate. Your wider circumstances determine whether a tax return is required.
Do I include savings interest if I already complete Self Assessment?
Yes. Relevant taxable savings income should be reported on your return even where some or all of it ultimately falls within an allowance.
Is ISA interest taxable?
Generally, no. Interest and other qualifying income generated within an ISA are tax-free.
Are Premium Bonds prizes taxable?
No. NS&I states that Premium Bonds prizes are tax-free.
Does HMRC know how much bank interest I’ve earned?
Banks and building societies provide savings-interest information to HMRC. You should still check your own records to make sure the figures used for your tax affairs are accurate.
Final thoughts
Savings interest can appear insignificant when it arrives as a few pounds each month.
Across several accounts and an entire tax year, however, it can add up.
The important figures are your total taxable savings income, your wider income and the allowances available to you.
If you already complete Self Assessment, make sure your relevant savings interest is included rather than assuming HMRC will add it automatically.
At Merranti Accounting, we can review income from savings alongside employment, dividends, property and other sources to make sure your Self Assessment reflects your complete tax position.
Written by Jenny Seaford ACPA
Senior Accountant, Merranti Accounting
Jenny works with individuals and businesses on their accounting and tax requirements, helping clients maintain clear financial information and understand how different sources of income affect their overall tax position.
