Savings Interest Tax Calculator, 2026/27
Once savings interest exceeds your personal savings allowance, it is taxed at your normal marginal rate. This calculator works out the actual tax bill on interest income, useful for directors weighing up cash reserves against dividends.
The savings interest tax calculator runs on the rates and thresholds HMRC has published for the 2026/27 tax year, so the figures you see reflect the position your company is actually filing on rather than a historic set of bands. Change any input and the result recalculates immediately, with no sign-up and nothing sent anywhere.
If you are a director of a UK limited company, use it as a first look before a decision rather than as the decision itself. Assumes interest is the top slice of income, taxed after salary, dividends and other non-savings income have used up the personal allowance and basic rate band. Real company positions bring in other income, reliefs, group structures and prior year adjustments that a single page of inputs cannot see, which is why the workings are written out below under personal & self assessment tax. Read those, then check the numbers against your own accounts, and speak to us if anything looks materially different from what you expected.
Last reviewed 12 September 2026 for the 2026/27 tax year. Reviewed by Waqas Sagar, Member of ICAEW, Fellow of ACCA, Fellow of AAT.
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Result, 2026/27
Tax due on your interest
Interest covered by your PSA
Taxable interest
Net interest after tax
Illustration only, figures are based on the rates you have selected and the information entered. Please check your own position with us before acting.
Estimates for the 2026/27 tax year using published GOV.UK rates. Switch between 2026/27 and 2025/26 above.
How this is calculated
Savings income sits on top of your other income in HMRC's tax stacking order, above salary, self-employment profit and pension income, but below dividends. This calculator first establishes your personal savings allowance from your other income, then taxes any interest above that allowance at whichever bands it falls into.
Where interest straddles the basic and higher rate boundary, part is taxed at 20% and the remainder at 40%, and the same logic extends into the 45% additional rate band above £125,140 of total income.
This differs from the personal savings allowance calculator elsewhere on this site, which only shows how much interest is tax-free. This calculator goes further and computes the actual cash tax bill on the taxable slice.
Interest versus dividends for directors
Directors holding surplus cash sometimes compare leaving money on deposit for interest against extracting it as dividends. Interest is taxed at the normal income tax rates shown here, while dividends benefit from a lower dividend allowance but also lower rates than equivalent salary.
The comparison depends heavily on the individual's total income and how much headroom is left in each band, so there is no single right answer without running both calculations.
Reducing tax on interest
Using ISA allowances first removes interest from tax altogether, and premium bond prizes are also tax-free, both of which reduce the amount exposed to this calculation. Spreading savings between spouses or civil partners to use two personal savings allowances, rather than concentrating them in one name, can also help.
For larger cash balances, fixed-term products that pay interest annually rather than monthly can sometimes be timed to fall more efficiently across tax years, though this needs weighing against the commercial terms of the product itself.
What this means for your company
Treat the result as a planning figure for the 2026/27 tax year. If it changes what you were about to do, take a director's salary, a dividend, a large asset purchase or a filing decision, check it against your own accounts first. We can review the position with you and confirm the tax treatment before you commit.
Frequently asked questions
Where does savings interest sit in the tax calculation?
Interest is taxed after non-savings income such as salary and self-employment profit, but before dividends, so it can be pushed into a higher band even if your salary alone would not reach it.
Do I pay tax on interest earned in an ISA?
No. Interest within an ISA is entirely tax-free and does not appear in this calculation at all.
How is tax on interest actually collected?
For most people it is collected through a tax code adjustment based on interest reported by banks to HMRC. Anyone already completing a self-assessment return should include the interest and settle the tax through the return instead.
Is interest taxed differently for directors than employees?
No, the rates and allowances are the same for everyone. What differs for directors is the comparison against taking money out as dividends instead of holding it on deposit.
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