Do I Have to Declare Savings Interest to HMRC?

A common question for savers is, "Do I have to declare savings interest to HMRC?”

The answer depends on:

  • How much interest you earn
  • Your total taxable income
  • Your income tax band
  • Whether you already complete a self-assessment tax return

In many cases, you do not need to separately declare savings interest because banks and building societies report it to HMRC. However, you are still responsible for ensuring the correct tax is paid.

Here’s what you need to know for the 2025/26 tax year.


How Savings Interest Is Taxed in the UK

Interest earned on most UK savings is taxable. This includes interest from:

  • Bank and building society accounts
  • Fixed-rate bonds and notice accounts
  • Some current accounts that pay interest
  • Credit union accounts
  • Peer-to-peer lending platforms
  • Certain authorised investment funds that pay interest distributions


Since April 2016, banks and building societies have paid interest gross (without tax deducted) and reported annual interest figures to HMRC after the end of each tax year.


Savings interest forms part of your total taxable income, alongside:

  • Employment income
  • Pension income
  • Rental income
  • Other taxable income

Your total income determines your tax band and whether any tax is due on savings interest.


Tax-Free Allowances on Savings Interest

Several allowances may reduce or eliminate the tax you pay on savings interest.


1. Personal Allowance

For most people, the Personal Allowance remains £12,570 (2025/26).
If your total income, including savings interest,  is below this amount, you will not pay income tax.


2. Starting Rate for Savings (Up to £5,000 at 0%)

If your non-savings income (such as wages or pension) is low, you may qualify for the starting rate for savings, which allows up to £5,000 of savings interest to be taxed at 0%.


However:

  • The £5,000 band reduces by £1 for every £1 your non-savings income exceeds your personal allowance.
  • If your other income exceeds £17,570, the starting rate no longer applies.


This allowance mainly benefits lower earners and some pensioners.


3. Personal Savings Allowance (PSA)

In addition to the above, most taxpayers receive a personal savings allowance:

  • Basic rate taxpayers: £1,000 tax-free interest
  • Higher rate taxpayers: £500 tax-free interest
  • Additional rate taxpayers: £0

This allowance applies after considering the starting rate (if available).


Do You Need to Declare Savings Interest?

In Most PAYE Cases — No Separate Action Is Required

If you are employed or receive a pension and your savings interest exceeds your allowances:


  • Banks report your interest to HMRC annually.
  • HMRC usually adjusts your tax code in a later year to collect any tax due.
  • Alternatively, HMRC may issue a P800 calculation or a Simple Assessment.

You can check what HMRC believes you have earned by logging into your Personal Tax Account.


You Must Report Savings Interest If:

You generally need to declare savings interest if:

  • You already complete a self-assessment tax return.
  • HMRC has not collected the correct tax automatically.
  • Your tax affairs are complex.
  • HMRC specifically instructs you to file a return.


If tax is due and not collected automatically, you are responsible for notifying HMRC.


Joint Accounts

Interest from a joint account is normally treated as split 50:50 between account holders for tax purposes.


If you are married or in a civil partnership and beneficial ownership is not equal, a formal declaration (Form 17) may be required to reflect the actual ownership split.


Each individual is responsible for their share of the interest.


What Savings Are Completely Tax-Free?

Some savings do not count towards your taxable income at all:

  • Cash ISAs and Stocks & Shares ISAs (within annual ISA limits)
  • Premium Bond prizes

Interest earned within an ISA does not use up your Personal Savings Allowance and does not need to be declared.


What Happens If You Don’t Pay Tax Owed?

Although HMRC collects savings data automatically, responsibility ultimately rests with the taxpayer.

If tax is due and not paid, HMRC may:

  • Issue a tax calculation
  • Adjust your tax code
  • Charge interest
  • Apply penalties in cases of failure to notify

If you believe HMRC’s figures are incorrect, you should contact them promptly.


How Much Interest Can You Earn Before Paying Tax?

There is no single fixed amount.

The amount you can earn tax-free depends on:

  • Your Personal Allowance
  • Whether the starting rate applies
  • Your Personal Savings Allowance
  • Your total taxable income

For example:

  • A basic-rate taxpayer may earn up to £1,000 tax-free under the PSA.
  • A higher-rate taxpayer may earn £500 tax-free.
  • An additional-rate taxpayer receives no PSA.

Understanding how these allowances interact is essential to avoid underpaying or overpaying tax.


When to Seek Professional Advice

Savings tax rules can become complex if you:

  • Have multiple income sources
  • Move between tax bands
  • Hold joint or investment-based savings
  • Receive large amounts of interest


A qualified accountant can review your total income, confirm your allowances and ensure your tax code or self-assessment return is correct.


Disclaimer

This article reflects UK tax rules for the 2025/26 tax year. Tax allowances, rates and legislation may change in future tax years. Individual circumstances vary, and professional advice should be obtained before making financial or tax decisions.

Company tax returns and accounts have gone digital

By Charlie Flockhart • April 21, 2026
HMRC and Companies House have confirmed that from 1 April, all businesses must use compliant, commercial software to file their company’s tax returns. As of 31 March, the free joint online service, commonly known as the CATO portal, from these two Government bodies has been removed and you must now use software to file company tax returns to HMRC. For the time being, you will still be able to file annual accounts at Companies House using third-party software, WebFiling services or paper filing. The decision has been made to end this service as it is “outdated and no longer aligns with modern digital standards”, according to Companies House. This change is in line with the introduction of the Economic Crime and Corporate Transparency Act, which implemented “enhanced corporation tax requirements and changes to UK company law.” It also follows on from a major IT security breach at Companies House, identified in March 2026, that exposed the WebFiling system and allowed some users to potentially access and amend the details of other companies. Although the breach has now been resolved and security strengthened, it has raised concerns about the reliability of GOV.UK One Login service.  Can you still amend previous returns using the free service? HMRC and Companies House have confirmed that now that the free filing service has closed, company directors will have to use commercial tax software if they need to make changes to a previously submitted Corporation Tax return or refile a rejected return. From now onwards, any previously filed financial information will no longer be available in the system, as it has not been retained and will need to be entered again. HMRC has said that, for amendments, it will also be acceptable to send a paper return to the Corporation Tax Services office. If you have previously filed financial accounts with Companies House and you want to make changes or corrections, this will also need to be done via commercial software or by sending paper accounts to Companies House via post. Are there any exceptions to this new rule? Companies can file a paper Corporation Tax return only in limited circumstances, such as if they wish to submit it in Welsh or can demonstrate a valid, reasonable excuse to HMRC. Otherwise, returns must be filed online using commercial software. If you are affected by this change and need help choosing and utilising commercial software to complete your Corporation Tax return, please speak to our team.

Capital allowances - New rules for a new tax year

By Charlie Flockhart • April 21, 2026
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Government abolishes work-from-home relief

By Charlie Flockhart • April 21, 2026
Directors and employees claiming work-from-home tax relief will no longer be able to claim it from the start of the new tax year – 6 April 2026. Why is this relief being taken away? The Chancellor announced the removal of the work-from-home relief as part of her latest Autumn Budget. The main reasoning given for the abolition is that it will support the nation’s deficit reduction. HMRC has also said that it no longer believes it is fit for purpose or easy to police. Who could claim work-from-home relief? Work-from-home relief has been utilised by homeworkers since the early 2000s, helping them offset some of the costs of heating, lighting, broadband and other home-office expenses required to complete their jobs. The relief allowed employees and directors to claim a flat rate of £6 per week or a deduction for actual costs. However, those who do not claim the flat fee were required to provide evidence of the exact costs, such as an invoice or bill. Eligibility for the relief only applied to individuals who had no other choice but to work from home. For instance, where the business did not have an office or the daily commute was not feasible. Individuals who simply preferred to work from home did not qualify. Is there any relief still available for home workers? The only remaining tax-free support will be reimbursements made directly by employers. This applies only where the payments relate to demonstrated additional household costs and where the costs are incurred wholly, exclusively and necessarily for employment duties. For anyone still claiming work-from-home relief, it is worth reviewing your position now to understand how this abolishment will impact your take-home pay.