The 10p tax rate on savings is the older name for what is now the UK’s 0% starting rate for savings, a band that lets you receive up to £5,000 of savings interest without paying any income tax on it. The 10% rate was restructured in 2015: it stopped applying to general income, was retargeted at savings income only, and dropped from 10% to zero. For the 2026/27 tax year, the Personal Allowance stays frozen at £12,570, and anyone whose wages, pensions, or other non-savings income sits at or below that threshold can receive the full £5,000 of savings interest tax-free.1GOV.UK. Income Tax Personal Allowance and the Basic Rate Limit From 6 April 2026 to 5 April 2028
How the Starting Rate Band Works
Section 12 of the Income Tax Act 2007 creates a dedicated tax band for savings income. If your taxable savings income falls within the first £5,000 above your Personal Allowance, it’s charged at 0% instead of the 20% basic rate.2Legislation.gov.uk. Income Tax Act 2007 – Section 12
The band isn’t fixed at £5,000 for everyone. Non-savings income fills it first. For every pound of non-savings income above your £12,570 Personal Allowance, the starting rate band shrinks by a pound. Hit £17,570 in non-savings income and the band is gone entirely.
So the relief is worth the most to people with little in the way of wages or pension. Reach £12,570 or below, and the full £5,000 is yours to use.
What Counts as Non-Savings Income
The income that eats into the band is anything that isn’t savings interest or dividends. That covers employment wages, self-employment profits, pension income (including the State Pension), rental income, and certain taxable state benefits. All of it sits at the bottom of the tax stack and uses up the Personal Allowance and starting rate band before any savings or dividend income gets counted.
This matters especially for retirees. A full new State Pension on its own uses up most of the Personal Allowance for 2026/27, and any private pension income on top of that starts to consume the starting rate band. The people who benefit most in practice are part-time workers, those living primarily off their savings, and pensioners with only small additional income.
Worked Examples
The maths is straightforward. Take your non-savings income, subtract £12,570, and reduce the £5,000 band by whatever is left.
- You earn £12,570 in wages and receive £3,000 in bank interest. Your non-savings income equals the Personal Allowance exactly, so the full £5,000 band is available. All £3,000 of interest is taxed at 0%.
- You earn £14,000 in wages and receive £4,000 in bank interest. Your wages exceed the Personal Allowance by £1,430, so the band shrinks from £5,000 to £3,570. The first £3,570 of interest is taxed at 0%; the remainder rolls into the next available allowance.
- You earn £18,000 in wages. That’s above £17,570, so the starting rate band is fully consumed. None of your savings income qualifies for the 0% starting rate.
How It Stacks With the Personal Allowance and Personal Savings Allowance
UK income tax works in a specific order, and knowing the order tells you which reliefs your savings interest passes through.
Non-savings, non-dividend income is taxed first and absorbs the £12,570 Personal Allowance. If any Personal Allowance is left over because your non-savings income falls below £12,570, the leftover can shelter savings income too, under what HMRC calls beneficial ordering.3GOV.UK. Income Tax Rates and Personal Allowances Then savings income enters the starting rate band, up to £5,000 and reduced as described above. Anything above the starting rate band meets the Personal Savings Allowance.
The Personal Savings Allowance is a separate 0% relief on further savings interest. Its size depends on your overall tax band: £1,000 for basic rate taxpayers, £500 at higher rate, and nothing at additional rate.4GOV.UK. Tax on Savings Interest The two reliefs stack. A basic rate taxpayer who qualifies for the full starting rate band could receive up to £6,000 in interest before tax, on top of any unused Personal Allowance.
Dividends sit above savings in the stack. The first £500 of dividends is covered by the dividend allowance at 0% for 2026/27. Dividends don’t reduce the starting rate band directly, but they do count toward the overall tax band that decides the size of your Personal Savings Allowance.
Accounts That Sit Outside These Calculations
Interest earned inside an ISA doesn’t count toward any of these allowances or bands. ISA returns are entirely tax-free and are ignored when working out how much of the starting rate band or Personal Savings Allowance you have left.4GOV.UK. Tax on Savings Interest The same applies to certain tax-free NS&I products and to Premium Bond prizes.
The upshot for planning: moving savings into an ISA doesn’t reduce the starting rate band, but it does mean less of your interest needs the band’s protection in the first place.
Scottish Taxpayers
Scotland sets its own rates and bands for non-savings, non-dividend income, but the starting rate for savings is a UK-wide provision. Scottish taxpayers use UK rates and bands when calculating tax on savings interest. The £5,000 starting rate at 0% and the Personal Savings Allowance work the same way whether you live in Edinburgh or Bristol.
Ways to Protect or Expand the Band
Marriage Allowance
If you’re married or in a civil partnership and one of you earns below the Personal Allowance, the lower earner can transfer £1,260 of their unused allowance to the other partner.5GOV.UK. Marriage Allowance – How It Works The recipient’s tax-free threshold rises to £13,830, which can preserve more of the starting rate band. It only works if the recipient is a basic rate taxpayer.
Pension Contributions
Personal pension contributions attract tax relief that extends the basic rate band. For someone whose non-savings income sits just above £12,570, a modest contribution can effectively pull taxable income back below the threshold and keep the starting rate band intact.
Claiming Tax Back if It Was Deducted
Since April 2016, UK banks and building societies have paid interest gross, without deducting tax at source.6UK Parliament. Chapter 2 – The Taxation of Savings Income Most people with ordinary bank interest have nothing to reclaim. But tax is still withheld from certain other savings and investment income, including some trust distributions and purchased life annuity payments. If tax was taken from those and your income was low enough to qualify for the starting rate band, you can claim it back.
The form is R40, “Claim a refund of income tax deducted from savings and investments,” available on GOV.UK. You can file online through the Government Gateway or by post.7GOV.UK. Claim a Refund of Income Tax Deducted From Savings and Investments R40 is only for people whose gross savings and investment income is £10,000 or less. Above that, or if you’re already in Self Assessment, you claim through your tax return.
You’ll need evidence of any tax deducted. Your P60 shows employment pay and tax for the year.8GOV.UK. Your P45, P60 and P11D Form For investment income where tax was withheld, you need a document from the paying company showing gross amount, tax deducted, and net amount. Where tax was deducted from interest, HMRC requires the evidence by post even if you started the claim online.
Backdating a Claim
You can claim for the current tax year and the previous four, filing a separate R40 for each.7GOV.UK. Claim a Refund of Income Tax Deducted From Savings and Investments In 2026/27 that reaches back to 2022/23. HMRC’s target turnaround for R40 is 15 working days, though real processing has often run longer, so filing early matters, particularly for older years nearing the four-year cut-off.
HMRC pays repayment interest on tax owed back to you at 2.75% as of January 2026, calculated from the date the tax was originally due.9GOV.UK. HMRC Interest Rates for Late and Early Payments Individual amounts tend to be small, but across several backdated years they add up.