Do pensioners pay tax on savings interest?

For the 2026/27 tax year · checked 22 Sep 2026 against GOV.UK

Many pensioners pay no tax on their savings interest. If your pension income is low, the £5,000 starting rate for savings can make up to £6,000 of interest a year tax-free.

The three tax-free allowances

Your interest uses these in order:

Unused personal allowance. The first £12,570 of your income is tax-free. If your pension is below that, the unused part covers interest.
Starting rate for savings. Up to £5,000 of interest tax-free. Every £1 of other income above £12,570 reduces it by £1, so it's gone once your other income reaches £17,570.
Personal Savings Allowance. £1,000 for basic-rate taxpayers, £500 for higher rate.

Examples with £60,000 of savings at 4%

That's £2,400 of interest a year. The full new State Pension for 2026/27 is £241.30 a week, or £12,547.60 a year.

Pension income	Tax on £2,400 interest
State Pension only (£12,548)	£0
State Pension + £5,000 private pension	£275.52
State Pension + £20,000 private pension	£280.00

With the State Pension only, you can earn up to about £6,000 of interest before paying any tax. That's roughly £150,000 of savings at 4%.

Try it with your pension and savings

Common questions

Do I need to tell HMRC? Usually not. Banks report your interest to HMRC. If tax is due, HMRC normally collects it through the tax code on your private pension, or sends a Simple Assessment bill if you only get the State Pension.

Does my State Pension count as income? Yes. It's taxable income, even though no tax is taken off it.

Sources: GOV.UK: tax on savings interest, GOV.UK: new State Pension.