Budget Summary- Taxation of Savings

From 6 April 2027, tax on savings income will increase by two percentage points. Currently taxable savings interest is taxed at the taxpayer’s marginal rate of income tax. however, from 6 April 2027, interest on savings will be taxed at 22% where it falls in the basic rate band, at 42% where it falls in the higher rate band and at 47% where it falls in the additional rate band.

Basic and higher rate taxpayers will continue to benefit from the personal savings allowance, which remains at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. additional rate taxpayers do not receive a personal savings allowance. The personal savings allowance is in addition to the personal allowance.

A savings starting rate of 0% applies to income that falls in the savings starting rate band. This is sweet at £5,000 but is reduced pound for pound by non-investment income in excess of the personal allowance. This is remaining in place.