ISA vs savings account calculator
Work out the tax on your savings interest in 2026 to 2027, what you keep after it, and the cash ISA rate that would leave you with the same money.
- More a year after tax in the cash ISA
- £100
- The savings account pays £900, but £160 goes in tax, leaving £740. The cash ISA pays £840.
- Savings account interest
- £900
- a year at 4.5% on £20,000
- Tax on it
- £160
- higher rate taxpayer, £500 allowance
- You keep
- £740
- after tax
- Cash ISA interest
- £840
- a year at 4.2%, tax-free
- Cash ISA rate that matches
- 3.70%
- the savings account after tax
- Tax from April 2027
- £168
- on the same interest at 22%, 42% or 47%
| Part of the interest | Amount | Tax |
|---|---|---|
| Personal Savings Allowance, 0% | £500 | £0 |
| Taxed at 40% | £400 | £160 |
| Total | £900 | £160 |
Rules for the 2026 to 2027 tax year, checked on 28 September 2026. Your £12,570 Personal Allowance, which shrinks by £1 for every £2 over £100,000, goes against your other income first. Interest then gets the starting rate for savings (up to £5,000, less £1 for every £1 of other income over the Personal Allowance) and the Personal Savings Allowance (£1,000 for basic rate, £500 for higher rate, nothing for additional rate, depending on your income including the interest). The rest is taxed at 20%, 40% or 45%, rising to 22%, 42% and 47% from 6 April 2027. Savings interest is taxed the same way in Scotland, though if your income including the interest is over £100,000 the allowance you lose costs Scottish rates. It works out one year's interest at the rates you enter and leaves out dividends, interest from other accounts (which shares the same allowances), Marriage Allowance and pension or Gift Aid payments that change your band. From 6 April 2027, under-65s can put up to £12,000 a year into cash ISAs, within the £20,000 ISA allowance.
What goes in
Put in your other income for the tax year before tax, such as wages, a pension or rent, then how much you have saved and the rates you’ve been offered. Use each account’s AER. The calculator works out a year’s interest in each account and the tax on the savings account’s interest.
What the result means
Cash ISA interest is tax-free. Outside an ISA most people can earn some interest tax-free too, so an account paying a higher rate can still come out ahead. The cash ISA rate that matches is the ISA rate that would leave you with the same money after tax, so any ISA paying more beats the account.
In the example, £55,000 of other income makes you a higher rate taxpayer. £20,000 at 4.5% pays £900. The first £500 is tax-free and the other £400 is taxed at 40%, which is £160, so you keep £740. A 4.2% cash ISA pays £840, £100 more, and any cash ISA paying more than 3.70% would beat the account.
The rules behind it
For 2026 to 2027 the Personal Savings Allowance is £1,000 for basic rate taxpayers, £500 for higher rate and nothing for additional rate, and the interest counts when working out your band. The starting rate for savings covers up to £5,000 more, less £1 for every £1 of other income over the £12,570 Personal Allowance, so it’s gone once other income reaches £17,570. Interest above both is taxed at 20%, 40% or 45%. Savings interest is taxed the same way in Scotland, and the allowance follows the UK bands rather than Scottish ones.
From 6 April 2027 the savings rates rise to 22%, 42% and 47%, so the same £900 would cost £168. The cash ISA limit also falls to £12,000 a year for under-65s, within the £20,000 ISA allowance. If you’re 65 or over you can still put up to £20,000 a year into cash ISAs. The next Budget could change any of these.
Sources
- GOV.UK: Tax on savings interest: how much is tax free
- GOV.UK: Income Tax rates and allowances for current and previous tax years
- GOV.UK: Income Tax in Scotland and Income Tax Act 2007, section 12B
- HMRC: Income Tax changes to tax rates for property, savings and dividend income
- HM Treasury: Budget 2025 overview of tax legislation and rates
- HMRC: Cash ISA limit reduction
- GOV.UK: Individual Savings Accounts