A new tax year officially begins just after midnight on April 6 bringing with it a full reset of annual tax allowances, thresholds and savings limits for households across the UK.
One of the key changes from Monday is the return of a fresh Personal Savings Allowance giving savers a new opportunity to earn interest without paying tax to HMRC giving savers new.
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Because savings allowances are based on the tax year rather than the calendar year, the new allowance will apply from April 6, 2026 until April 5, 2027 period.
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What the Personal Savings Allowance Means
The Personal Savings Allowance PSA is the amount of interest you can earn from savings held outside of ISAs in one tax year before tax becomes payable.
How much of this allowance you get depends on your income tax band level.
Although the allowance has been confirmed for the new tax year, it has not been increased by Chancellor Rachel Reeves or HM Treasury. This means that, when inflation is taken into account, the tax-free value of the allowance has effectively been reduced in real terms.
Personal Savings Allowance for 2026/27
For the 2026/27 tax year period, the Personal Savings Allowance remains as follows:
- £1,000 for basic-rate taxpayers earning under £50,270 threshold level
- £500 for higher-rate taxpayers earning £50,270 or more income
- £0 for additional-rate taxpayers earning £125,140 or more income
This means the amount of savings you can hold tax-free outside an ISA depends heavily on the interest rate your bank or savings provider is offering.
How Much You Can Save Tax-Free
For someone with the full £1,000 allowance available, the amount of savings that can be held before crossing the tax threshold varies by rate.
For example:
- At 4% interest rate example, you could hold around £25,000 savings before earning £1,000 in interest
- At 5% interest rate example, you could hold around £20,000 savings total amount
- At 3% interest rate example, you could hold nearly £33,333 savings before paying tax
For higher-rate taxpayers with a £500 allowance available, the threshold is much lower.
- At 5% interest rate case, just £10,000 in savings amount could generate £500 interest
- At 4% interest rate case, around £12,500 savings would reach the limit
For additional-rate taxpayers, there is no Personal Savings Allowance at all, meaning any savings interest earned outside an ISA may be taxable.
Starting Rate for Savings Still Available
Lower earners may also be able to benefit from the Starting Rate for Savings, which remains unchanged for the new tax year.
This rule allows some people earning under £17,570 income threshold level to earn up to £5,000 in savings interest without paying tax on it.
This is separate from the Personal Savings Allowance and can be especially useful for pensioners, part-time workers and people with lower taxable incomes.
How HMRC Collects Savings Tax
Many savers may not realise that banks and building societies automatically report savings interest to HMRC.
If you earn more interest than your tax-free allowance allows, the tax is usually collected in one of two ways:
- Through a change to your tax code
- Via a Self Assessment tax return, if you already complete one
This means even if you do not actively report your savings interest yourself, HMRC is likely to know about it.
Why Savers Should Check Their Accounts Now
With savings rates still relatively high compared with previous years, more people are now at risk of crossing their tax-free savings threshold without realising it.
Anyone with a large amount of money held in standard easy-access accounts, fixed savers or regular savings products may want to review how much interest they are likely to earn over the next 12 months.
For some households, moving money into a Cash ISA or spreading savings between partners could help reduce tax exposure.
Key HMRC Savings Limits for 2026/27
| Allowance / Threshold | 2026/27 Amount | Who It Applies To |
|---|---|---|
| Personal Savings Allowance | £1,000 | Basic-rate taxpayers (under £50,270) |
| Personal Savings Allowance | £500 | Higher-rate taxpayers (£50,270+) |
| Personal Savings Allowance | £0 | Additional-rate taxpayers (£125,140+) |
| Starting Rate for Savings | £5,000 | People earning under £17,570 |
| Tax year period | April 6, 2026 – April 5, 2027 | All UK taxpayers |
Examples of Tax-Free Savings by Interest Rate
| Interest Rate | Savings Allowed Tax-Free (Basic Rate) | Savings Allowed Tax-Free (Higher Rate) |
|---|---|---|
| 3% | Approx. £33,333 | Approx. £16,666 |
| 4% | £25,000 | £12,500 |
| 5% | £20,000 | £10,000 |
Conclusion
The start of the new tax year gives savers a fresh chance to make the most of their tax-free savings allowance benefits, but the unchanged limits mean many households could still be caught out if they are earning more interest than expected.
With banks reporting savings interest directly to HMRC, checking your accounts now could help you avoid an unexpected tax bill later in the year.
