Will your savings interest get taxed?
2026/27 ISA allowance is £20,000. Below the Personal Savings Allowance you pay nothing anyway. Move the sliders to see if a cash ISA actually saves you tax.
Last reviewed: 2026-05-20
PSA £1,000 = £1,000 of interest a year tax-free before any ISA is needed.
Move £20,000 into a cash ISA this tax year and you'd shelter £900/yr of interest from tax. Full shelter would take ~2 years.
2026/27 rules: £20,000 adult ISA allowance, PSA £1,000 basic / £500 higher / £0 additional, starting rate for savings up to £5,000 tapered above the personal allowance. Educational - not regulated advice.
Compare today’s best Cash ISA rates
Most over-50s are still in old accounts paying under 1%. See FSCS-protected ISAs paying 4%+ today.
How long to move it all inside an ISA?
Move this much into a cash ISA before 5 April.
Carries over to next tax year's £20k allowance.
At the full £20,000/yr fill rate.
How the three tax-free buckets stack
UK savers have three separate tax-free buckets for interest, and they apply in this order:
- Starting rate for savings - up to £5,000 of interest at 0%, available if your non-savings income is below £17,570. It tapers down £1 for £1 once your non-savings income passes the £12,570 personal allowance.
- Personal Savings Allowance (PSA) - £1,000 if you're a basic-rate taxpayer, £500 if you're higher-rate, £0 if you're additional-rate.
- Cash ISA - everything inside it is tax-free, no matter how much interest it earns and no matter what tax band you're in. The current annual allowance is £20,000.
A basic-rate taxpayer with a salary of £40,000 and £25,000 in easy-access savings paying 4.5% gets £1,125 of interest. The PSA covers the first £1,000, so only £125 is taxed at 20% - a £25 bill. That's below the level where an ISA materially helps in the same year. But add another £25,000 of savings next year and the maths flips quickly.
Higher-rate taxpayers and anyone with cash savings above ~£25,000 should usually be filling their ISA every April. Once money is inside the ISA wrapper, it stays tax-free forever - even if you later become a higher-rate taxpayer or the PSA gets cut.
Cash ISA vs stocks-and-shares ISA
The £20,000 ISA allowance is shared across all four adult ISA types. Most people in retirement or approaching it use the cash ISA for emergency money (rate certainty, FSCS protected) and the stocks-and-shares ISA for the rest (better long-term growth, but with capital risk). The Lifetime ISA caps at £4,000 of the £20k and is for under-50s saving a deposit or pension supplement.
Related
Common questions
- What is the ISA allowance for 2026/27?
- The total adult ISA allowance for 2026/27 is £20,000. It is shared across all four adult ISA types - cash ISA, stocks-and-shares ISA, innovative-finance ISA and lifetime ISA (with the LISA capped at £4,000 of the £20k). The Junior ISA allowance is a separate £9,000. Allowances reset at the start of each tax year on 6 April and any unused allowance does not carry forward.
- What is the Personal Savings Allowance in 2026/27?
- The Personal Savings Allowance (PSA) lets basic-rate taxpayers earn £1,000 of savings interest a year tax-free, and higher-rate taxpayers earn £500 tax-free. Additional-rate taxpayers get no PSA. At today's easy-access rates of around 4.5%, a basic-rate taxpayer can hold roughly £22,000 outside an ISA before any interest gets taxed; a higher-rate taxpayer hits the £500 PSA at around £11,000 of savings.
- What is the starting rate for savings?
- If your non-savings income (salary, pension, rental etc) is below your £12,570 personal allowance, you also get a £5,000 "starting rate for savings" band at 0%. Above the personal allowance, that £5,000 band tapers down £1 for £1 - so it disappears once your non-savings income hits £17,570. People living mainly off savings or with low pension income in early retirement often have £15,000+ of tax-free interest available before any cash ISA is needed.
- Can I have more than one cash ISA in the same tax year?
- Yes - since 6 April 2024 you can pay into multiple cash ISAs in the same tax year, as long as the total across all of them does not exceed your £20,000 allowance. This is a change from the old "one ISA of each type per year" rule. You can also transfer existing cash ISAs between providers without using any of the current year's allowance.
- Cash ISA or easy-access savings - which is better in 2026/27?
- The headline easy-access rate is usually a touch higher than the headline cash ISA rate (around 5.00% vs 4.51% in May 2026). For basic-rate taxpayers with under £1,000 of interest a year, the easy-access account often wins on rate alone because the PSA covers the tax. For higher-rate taxpayers, anyone with £25,000+ of cash, and people building a larger savings pot over time, the cash ISA usually wins because every £1 inside it is tax-free forever and accumulates.
- Does moving money into a cash ISA use my allowance?
- Only if it is new money. Transferring an existing ISA from one provider to another does not use any of the £20,000 allowance - you just complete the new provider's ISA transfer form and they handle it. Withdrawing from a "flexible" cash ISA and replacing the money in the same tax year also does not use extra allowance. The £20,000 cap only applies to new cash going in.