HMRC has announced a change to the tax treatment of some savings that increases the tax-free personal allowance to £18,570 under a specific savings rule from March 2026. This change affects how certain savings income interacts with your personal allowance and could reduce tax on interest for eligible savers.
What the £18,570 personal allowance change means
The increased allowance means eligible taxpayers can shield more savings income from tax before higher-rate or basic-rate bands apply. The change is specific to the savings rule announced by HMRC and does not automatically increase the standard personal allowance for all taxpayers.
It is important to check whether you meet the criteria for the savings rule, because the way tax bands apply to savings income can vary depending on your other income and tax code.
Who benefits from the savings rule increase to £18,570
Not everyone will benefit from this change. The most likely beneficiaries are people with modest non-savings income and larger amounts of savings interest.
- Retirees whose pension and state pension leave room for savings income.
- People with low employment income but higher savings interest.
- Savers whose total income sits close to higher-rate thresholds.
Key categories to check
Review your income sources: employment, pensions, savings interest and dividends. If savings interest previously pushed you into a higher band, the new treatment could reduce tax paid on that interest.
How the savings rule works with the £18,570 allowance
The savings rule rearranges the order in which different types of income use up your personal allowance and tax bands. Under the updated approach linked to the £18,570 figure, a larger portion of savings income may be taxed at 0% up to that level.
HMRC will apply the rule when calculating tax due, but you should check your PAYE coding notice and Self Assessment if you file a tax return. Incorrect codes can mean you pay the wrong tax and need to claim a refund later.
Practical steps to apply the savings rule
- Check your current tax code on a recent payslip or HMRC online account.
- Estimate your total income including savings interest for the tax year.
- If you use Self Assessment, include all savings income and note the new rule in calculations.
- Contact HMRC if your code does not reflect the new treatment and request an adjustment.
Some savings interest may be paid gross without tax deducted. The £18,570 treatment can alter whether that interest remains tax free or becomes subject to PAYE adjustments.
Simple example of the £18,570 savings rule effect
Understanding the impact is easier with an example. Below is a short case that shows before-and-after tax outcomes for one type of saver.
Case study: Retiree with savings interest
Jane, a retiree, receives a state pension of £9,000 and bank interest of £10,000. Her total income is £19,000. Previously, the standard personal allowance and the order of income might have left some interest taxed.
With the new savings rule applying a £18,570 allowance to savings, Jane could see most or all of her £10,000 interest fall within the tax-free treatment, reducing her taxable income and tax bill. Exact numbers depend on the order HMRC applies and any other taxable income.
This simple scenario shows how savers near band thresholds can benefit. Always run your own figures or seek advice for precise outcomes.
Action checklist for savers and advisers
- Review your latest HMRC tax code and PAYE notices.
- Estimate total income with and without savings interest for the 2026 tax year.
- Update Self Assessment details if you file a return.
- Contact HMRC by phone or secure message if your code seems wrong.
- Consider adjusting the timing of withdrawing savings to optimise tax treatment.
When to contact HMRC or a tax adviser
Contact HMRC if your tax code does not reflect the change or you suspect overpayment. A tax adviser can help with complex situations, for example where you have rental income, dividends, or non-UK income.
For most straightforward cases, checking your online HMRC account and updating Self Assessment entries will be sufficient.
Key dates and next steps
The new treatment takes effect from March 2026, so start preparing now. Gather records of all income sources for the current tax year to estimate the impact.
Keep an eye on HMRC guidance pages and your personal account messages. If HMRC issues new calculators or guidance, use them to verify your position before making changes.
In summary, the £18,570 boost under the savings rule can lower tax on savings for eligible people. Verify your eligibility, check tax codes, and seek help where your situation is complex to ensure you benefit properly from the change.