Savings tax rises to 24%, 44% and 49%: what the Budget means for your savings

The Budget on 28 October brought another rise in the tax on savings interest. From April 2027, interest on savings held outside an ISA will be taxed at 24% for basic rate taxpayers, 44% for higher rate and 49% for additional rate.

Last year's Budget had already announced a 2-point rise for April 2027. This year's adds two more, so savings interest will be taxed 4 points above the rates on wages, which stay at 20%, 40% and 45%.

Most families won't pay a penny more, because of the Personal Savings Allowance and ISAs. For anyone with a decent amount saved outside an ISA, though, it's worth a look.

What changes, and when

All figures come from the Budget 2026 rates and allowances annex on GOV.UK.

Several things stay the same:

• Personal Savings Allowance: £1,000 of interest a year tax-free for basic rate taxpayers, £500 for higher rate, none for additional rate.
• Starting rate for savings: if your other income is low, up to £5,000 of interest can still be tax-free at the 0% starting rate.
• ISA allowance: £20,000 a year, and interest inside an ISA is still tax-free.
• Junior ISA allowance: £9,000 a year.

Will it cost you anything?

Only if your interest from savings outside ISAs is more than your allowance. The table shows the yearly tax on the interest, now and from April 2027, assuming the savings pay 4%:

On £20,000, a basic rate taxpayer pays nothing either way, because £800 of interest fits inside the £1,000 allowance. A higher rate taxpayer pays tax on the £300 above their £500 allowance, which rises from £120 to £132 a year. The extra cost is modest for most savers, but it adds up over the years and with bigger sums.

What about children's savings?

Interest in a Junior ISA is tax-free, so the rise doesn't touch it.

A child's ordinary savings account is a little different. Children have their own Personal Allowance and can usually earn interest without paying tax. But if the money came from a parent and earns more than £100 of interest a year, all of that interest is taxed as the parent's income. This is a long-standing rule to stop parents moving savings into their children's names to avoid tax. With savings tax going up, it's one more reason many families use a Junior ISA for money they give their children.

Why gilts get a little more interesting

Gilts are loans to the UK government. You buy one, it pays a small fixed amount of interest twice a year, and the government pays back £100 for each £100 of "nominal" when it matures.

Some gilts issued when interest rates were low now sell for less than £100. If you hold one to the end, most of your return comes from the price rising back to £100, and that gain is free of capital gains tax. Only the small interest payments are taxed.

That means the savings tax rise mostly hits savings accounts, and barely touches low-interest gilts. On 27 October's figures, a higher rate taxpayer with no allowance left would need a savings account paying about 8.25% to match the 0¼% gilt maturing in 2031. From April 2027, with the higher tax rate, that rises to about 8.8%. For basic rate taxpayers it goes from about 6.3% to 6.6%.

Gilts aren't right for everyone. Prices move every day, so if you sell before a gilt matures you could get back less than you paid, and on small sums dealing fees can wipe out the advantage. If your interest is under your Personal Savings Allowance, a normal savings account is already tax-free for you and most of the gilt advantage disappears.

Our gilt calculator shows every gilt maturing in the next five years. For each one you can see how much of the return is taxed interest and how much is tax-free gain, and the savings rate you'd need to match it in your tax band. It lets you pick the current tax rates or the ones from April 2027.

The short version

• From April 2027, tax on savings interest outside ISAs rises to 24%, 44% or 49%.
• The Personal Savings Allowance, ISA allowance and Junior ISA allowance don't change.
• Most families with modest savings won't pay any more tax.
• For larger savings, an ISA is the simplest way to keep interest tax-free.
• Interest in a child's Junior ISA stays tax-free. Money a parent puts in an ordinary children's account can be taxed as the parent's income once it earns more than £100 a year.
• Low-interest gilts are affected much less than savings accounts, because most of their return is tax-free gain.

This article explains how the tax rules work. It isn't financial advice. If you're unsure what's right for your situation, speak to a regulated financial adviser.