IN PLAIN ENGLISH
The interest you can earn each year outside an ISA before tax is due, smaller for higher earners.
FULL DEFINITION
The amount of savings interest each tax year that's taxed at 0%, set by your tax band.
EXAMPLE
At 2026/27 rates it's £1,000 at basic rate, £500 at higher rate and nothing at additional rate, so £1,200 of interest at basic rate leaves £200 taxed at 20%: £40.
HOW IT'S CALCULATED
Interest is the figure you entered for the tax year or, for this tax year, a year at today's balances and rates on your hand-entered cash accounts (Estimated Annual Interest), leaving out accounts marked ISA or pension; linked bank balances carry no rate. Working from your income, the personal allowance and then the starting rate for savings (0% on a band that shrinks by every £1 of other income above the personal allowance) come first. The allowance for your band covers the next slice, and the rest is taxed at the savings rate for the band it lands in.
Educational content only. It is not personal financial advice.