Turning 65 does not automatically make savings interest tax-free in the UK. Your position depends on total income, Income Tax band, the Personal Allowance, starting rate for savings and Personal Savings Allowance. A separate age-related rule is planned from 6 April 2027: according to the current government technical note, savers over 65 will retain a £20,000 annual cash ISA limit.
For the 2026–27 tax year, the Personal Savings Allowance remains £1,000 of interest for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. Those amounts refer to interest earned, not the balance deposited.
Which interest counts?
HMRC includes interest from banks, building societies, credit unions, certain funds, bonds and peer-to-peer lending. Interest on a joint account is normally divided equally unless HMRC is told the beneficial ownership differs. Interest within an ISA and certain tax-free National Savings and Investments products does not use the Personal Savings Allowance.
Can the starting rate for savings help pensioners?
It can help people with relatively low non-savings income. The starting rate may cover up to £5,000 of savings interest, but every £1 of other income above the Personal Allowance reduces it by £1. It is unavailable when other income reaches £17,570. State and private pension income will generally form part of that calculation, so add pensions, earnings and other taxable income before assuming the full rate applies.
What changes for cash ISAs after age 65?
For 2026–27, the overall ISA subscription limit remains £20,000. A change announced for 6 April 2027 is due to introduce a £12,000 cash ISA limit within the £20,000 overall allowance. The government technical note says savers over 65 will continue to be able to put up to £20,000 a year into a cash ISA. Because this applies to a future tax year, check the final rules before making a major transfer.
How is tax collected?
Banks and building societies report interest to HMRC. For employees and pension recipients, HMRC may adjust the PAYE tax code using an estimate based on earlier interest. People completing Self Assessment report savings income on their return. Registration may be required when savings and investment income exceeds £10,000. Contact HMRC if an allowance has been exceeded but no calculation arrives, or if the estimate looks wrong.
Practical checklist
- Record interest actually received in the tax year, not only the advertised rate.
- Add all taxable income, including pensions.
- Separate ISA interest from ordinary accounts.
- Check the tax band after adding savings income.
- Review tax-code changes and keep annual statements.
- Seek regulated advice for foreign interest, estates or multiple complex pensions.
Frequently asked questions
Do over-65s get a larger Personal Savings Allowance?
No. The allowance is determined by the Income Tax band, not age.
Is ISA interest always free of UK tax?
Income and gains kept within the ISA wrapper are generally tax-free in the UK, subject to the applicable ISA rules and subscription limits.
Sources: GOV.UK — Tax on savings interest and the 2027–28 technical note.
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