Why HMRC has written to you
After the end of each tax year, your bank or building society tells HMRC how much interest you earned. If that's more than your tax-free allowances, HMRC works out the tax and collects it. GOV.UK says these calculations are usually sent between June and the following March after the tax year ends.
You don't have to do anything to trigger this — and you don't need to file a Self Assessment return just because of savings interest, unless it's over £10,000 or you already file.
How much interest is tax-free
| Your income tax band | Personal Savings Allowance |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
On top of that, the starting rate for savings gives up to £5,000 of interest at 0% if your other taxable income is below £17,570. Every £1 of other income above your Personal Allowance reduces it by £1. Interest inside an ISA doesn't count at all.
Example from GOV.UK: someone earning £16,000 in wages has £3,430 above the £12,570 Personal Allowance, so their starting rate band shrinks to £1,570 — their £200 of interest is tax-free.
Useful tool
Add your wages and interest to the tax calculator to see what's taxable.
How HMRC collects the tax
Through your tax code
If your interest is £10,000 or less and you're employed or get a pension, HMRC usually changes your tax code — either to collect last year's tax or to include an estimate of this year's interest. Your code number goes down, so a little more tax comes off each payslip. Our tax codes guide explains how to read the new code.
With a Simple Assessment letter
If your code can't be adjusted — for example you're retired with only the State Pension — HMRC may send a Simple Assessment letter showing what you owe and how to pay. If it's sent before 31 October 2026 for the 2025/26 year, you pay by 31 January 2027. If it's sent on or after 31 October, you have three months from the date of the letter. You'll need the 14-character payment reference starting with X printed on it.
Through Self Assessment
If your interest is over £10,000, you need to report it on a Self Assessment return — HMRC will send a notice to file. If you already file a return, your interest goes on it and the tax is worked out there.
What to check before you pay
- Compare against your bank statements. Your bank's annual interest statement shows the gross interest paid in the tax year.
- Exclude ISAs. Cash ISA and other ISA interest is tax-free and shouldn't be included.
- Joint accounts. Interest is normally split equally between joint holders — check you haven't been taxed on all of it.
- Your tax band. If your income has dropped, you may be due the larger £1,000 allowance or the starting rate for savings.
- Timing. Interest is generally taxed in the year it's paid or credited to you. Check how your fixed-term bonds pay interest.
Query within 60 days
If you think a Simple Assessment is wrong, GOV.UK says you must contact HMRC within 60 days. Don't ignore it — and don't pay a bill you think is wrong without querying it.Is the letter genuine?
Genuine Simple Assessment letters arrive by post or in your Personal Tax Account. HMRC won't text or email you a link to pay a savings tax bill. If in doubt, sign in to your account through GOV.UK or the HMRC app directly — see our HMRC sign-in guide.
If you file a Self Assessment return
Savings interest is one of the most common things people get wrong on a return. With TaxGo, you upload your bank's annual interest statements and TaxGo reads the figures, applies the right allowance for your tax band, and shows exactly where each number came from.