How to pay less tax on savings interest
For the 2026/27 tax year · checked 22 Sep 2026 against GOV.UK
The main ways are to move savings into a Cash ISA, use your partner's allowance, and, if you're just over £50,270, pay more into a pension so you're back in the basic-rate band. All are legal and straightforward.
A worked example
Sam earns £49,000 and has £45,000 in a savings account earning £2,000 of interest. Their total income of £51,000 makes them a higher-rate taxpayer, so their tax-free allowance falls to £500 and they pay £446 on their interest.
| What Sam does | Tax saved a year |
|---|---|
| Moves £22,500 to a partner with no savings | £446 |
| Moves £20,000 into a Cash ISA | £424 |
| Pays £800 more into a pension | £246, plus tax relief on the £800 |
1. Use a Cash ISA
Interest in an ISA is tax-free and doesn't count towards your allowance. You can pay in up to £20,000 a year in 2026/27. From April 2027, under-65s can put a maximum of £12,000 a year into cash. Moving money in each April builds up a tax-free pot over time. Is an ISA better for you?
2. Use your partner's allowance
Each person has their own Personal Savings Allowance. If your partner pays less tax or has no savings, holding some savings in their name, or in a joint account, means their allowance covers that interest. Gifts between spouses and civil partners have no tax consequences, but the money legally becomes theirs.
3. Pay into a pension if you're just over £50,270
If your income plus interest is a little over £50,270, you lose half your Personal Savings Allowance. Pension contributions bring your income back into the basic-rate band, so your tax-free interest goes back up to £1,000, and you get tax relief on the contribution too. Speak to your employer or pension provider about how you pay in.
4. Time when fixed bonds pay out
Interest on a fixed-rate bond is usually taxed in the tax year it's paid, often all at once when the bond matures. A bond that pays out in one lump can push you over your allowance. Choosing a bond that pays yearly, or one that matures in a different tax year, can spread the interest across more allowances.
5. Consider Premium Bonds
Premium Bonds prizes are tax-free. The prize rate is an average, so your actual return may be higher or lower, but for higher-rate taxpayers the after-tax comparison with a savings account is often close.
This is general guidance, not personal advice. Sources: GOV.UK: tax on savings interest, GOV.UK: ISAs, GOV.UK: pension tax relief.