If you hold savings accounts, ISAs, or earn interest on your deposits, there are several tax changes you should know about. From new ISA limits to HMRC catching up with your bank interest, here is what matters for you right now.

Are You Paying Tax on Your Savings Interest?

With interest rates having risen sharply in recent years, many savers are earning more on their deposits than they have in a long time — but that also means more people are exceeding their tax-free allowances. Your Personal Savings Allowance lets you earn up to £1,000 of savings interest tax-free if you are a basic rate taxpayer, or £500 if you pay higher rate tax. Additional rate taxpayers do not receive an allowance at all. If your non-savings income is below £17,570, you may also benefit from the Starting Rate for Savings, which shelters up to £5,000 of savings income.

From late September 2026, HMRC will begin issuing P800 tax calculations or Simple Assessment notices for tax owed on bank and building society interest earned between April 2025 and April 2026. Banks report your interest to HMRC each year, so even without a Self Assessment return, they will know what you have earned. If you are taxed through PAYE, any underpayment will typically be collected by adjusting your tax code.

Tip: Use HMRC’s online calculator to check whether you might owe tax on your savings interest, and keep an eye out for a letter this autumn.

ISA Changes: New Cash Limit from April 2027

ISAs remain one of the best ways to shelter savings from tax — income and gains within an ISA are completely free of Income Tax and Capital Gains Tax, and the overall annual limit stays at £20,000 until at least 5 April 2031.

However, from 6 April 2027 a new annual cash ISA limit of £12,000 will apply within that £20,000 allowance. If you currently put the full amount into a cash ISA, you will need to redirect at least £8,000 towards stocks and shares or other ISA types to use your full allowance. Savers over 65 are exempt and can continue saving up to £20,000 in cash. The previously proposed British ISA (UK ISA) has been scrapped.

Lifetime ISA: A Replacement on the Way

If you hold a Lifetime ISA to save towards your first home, the government plans to consult on a new, simpler product for first-time buyers, which will eventually replace the Lifetime ISA. The annual Lifetime ISA limit remains at £4,000, and the Junior ISA and Child Trust Fund limit stays at £9,000 until 5 April 2031.

Starting Rate for Savings: Frozen Until 2031

The Starting Rate for Savings band will remain at £5,000 through to tax year 2030-31, allowing individuals with employment or pension income below £17,570 to receive up to £5,000 of savings income tax-free. If you are on a low income, this is a valuable relief worth checking.

What Should You Do Now?

With these changes ahead, it is worth reviewing your savings strategy. Make the most of your ISA allowance before the new cash cap takes effect, check whether you might owe tax on interest earned this year, and look out for any correspondence from HMRC this autumn. A little forward planning now can help you keep more of what you save.