HMRC’s new savings allowances for 2026-27 are confirmed (Image: Getty)
A new tax year officially begins from Monday at just after midnight on April 6 and with it, all of the annual allowances and limits will be reset for the new tax year.
It means that there will be a brand new Personal Savings Allowance to use up from April 6 which will be available all the way to April 5, 2027, as savings limits are based on tax years rather than calendar years of January to December, and the new tax year begins on Monday.
HMRC has confirmed the tax-free savings allowances available to UK households from Monday, though sadly, unlike the state pension and other benefits from the DWP, the savings allowances have not been increased by Chancellor Rachel Reeves and HM Treasury, so in real terms they are actually slightly reduced when accounting for inflation.
Read more: Tax-free Personal Allowance rises to £20,070 from April using HMRC rule
Read more: Households urged to add £40,000 to Cash ISA accounts in 48 hours
The Personal Savings Allowance is the total amount of interest you can earn in savings accounts outside of ISAs in a single tax year, without owing any tax on it to HMRC. How large your Personal Savings Allowance is depends on how much you earn, with different, lower allowances for higher earners.
The basic taxpayer Personal Savings Allowance for 2026-27 will be £1,000, for anyone who earns less than £50,270.
That means you can earn £1,000 of interest from savings without paying tax on it. For a good 4% savings account, you can save £25,000 of interest tax-free in a single tax year. If you got 5%, you could save £20,000 tax-free, and at 3% interest, you would be able to save nearly £35,500 tax-free, so the total amount of interest you can earn depends on your savings interest rate, but at typical market interest rates you could have a good chunk stashed away without paying tax on the interest.
For those earning £50,270 or more, the Personal Savings Allowance for 2026-27 will be just £500, which means you can only earn £500 in savings interest in a single tax year. Naturally, that would take half the amount of savings to exceed – just £10,000 at 5% or £12,500 at 4%.
And for those fortunate enough to be earning £125,140 per year or more, the tax-free Personal Savings Allowance is sadly slashed down to £0. That means you can’t earn any interest in any account outside of an ISA without owing some tax on it to HMRC.
Banks also automatically report any earned interest to HMRC, so you will have the tax owed on interest taken from you via a change in tax code, unless you already submit a self-assessment tax return each year, in which case it will likely be paid that way.
For lower earners, there is also the Starting Rate for Savings, which gives those earning under £17,570 the chance to earn £5,000 of savings interest without owing any tax on it, and this remains at the same £5,000 level for 2026-27.
