Tax on savings

[Confuzzleduzzled]

I have just over £20k of savings in a savings account with hsbc. Am I supposed to declare this somewhere to pay tax on it? I don’t fill out a self assessment at the moment as I’m just on PAYE.
Are there tax free ways of saving more than 20k?

Only if the interest earned takes you over your personal tax allowance.

Is it an ISA or a normal savings account? If it’s a normal savings account you will potentially pay tax on the interest depending on your income tax rate. Consider putting it in an ISA. You may prefer cash or stocks and shares depending on your attitude to risk - MSE has guides on top picks and what to choose.
https://www.gov.uk/individual-savings-accounts
https://www.gov.uk/apply-tax-free-interest-on-savings

If you haven’t used this years isa allowance get 20k in to an isa tomorrow

Banks share information with HMRC. If you owe tax on it, HMRC will collect it either via your PAYE code or send you a simple assessment calc.

if you do pay tax on it, then best to put it in an ISA or premium bonds.

If you're a basic rate tax payer, you can earn £1k a year in interest on savings without paying tax.

If you have £20k in a 5% savings account, that would be £1k interest a year

You don't pay tax on your savings you pay tax on the interest. You can earn £1000 or £500 of interest tax free depending on if you are a basic rate or higher rate tax payer. Also interest on ISAs is always tax free. If you don't already I would get your money in an ISA quick before the ISA limit is reduced.

https://www.gov.uk/apply-tax-free-interest-on-savings

According to this HMRC will adjust your tax code if you are on PAYE and need to pay tax on savings interest. Transfer £20k into an ISA.

The interest on some ordinary bank & building society savings accounts are paid net anyway. Check with your bank.

You would be very hard pushed to find one since 2016. I complete tax returns for a living and not one of our 900 clients has a UK bank or building society account paying net. I'm sure there may be some but they are not common.

That is so unusual that it is very, very unlikely to be the case now.

How much interest are you earning this tax year? What is your highest tax rate / other earnings?

Cash ISA and don’t get one that pays under 4%.

I think from what I’ve read, if you are a basic rate tax payer, you can keep £1000 of any interest earned, this is your personal savings allowance, before you will be taxed. I think this is correct, someone please correct me if I am wrong.

You pay tax on the interest not the savings

yes if you are a basic rate tax payer and your savings attract interest and are not in an ISA you would need to do a tax return if you got more than 1000 interest in any one year

if yiu are a higher rate tax payer, the limit is 500

My current account doesn’t pay interest, so does that mean my savings won’t be taxed?

Err ... why the rush? You have until 5th April 2026?

If all your savings are in your current account then no. If you have other savings that do pay interest then potentially yes depending on the amount of interest and other earnings.

Most people won't need to do a tax return just for savings interest. Only self-employed and others who do self assessment anyway. Done via tax code for most people. See link on earlier post.

I don’t declare mine but the years I’ve earnt over the personal allowance hmrc have received the info from the banks and adjusted my work paye code accordingly so I end up paying the right tax on the interest

The banks tell HMRC now. If you're on PAYE and don't need to complete a tax return, HMRC should give you the choice of paying the tax on any interest over £500/£1,000 or adjusting your tax code to collect it. You don't need to complete a tax return for the sake of earning £600 in interest.

not if you are being taxed on interest, ok unlikely on £20k but we don’t know what rate they are getting

Thats correct. There wont be tax to pay on those savings as you aren't getting interest.
Why would you save money in an account that dosent pay interest though? It kind of defeats the purpose if you aren't even getting a small amount of interest to offset the capital being eroded by inflation.

Actually until April 2027:

https://www.moneysavingexpert.com/news/2025/11/cash-isa-limit-cut-martin-lewis-budget/

@Confuzzleduzzled If it’s in a standard interest bearing account and the interest is between £1,000 and £9,999 then about 6 months after the tax year end (Dec) HMRC will issue you with a new tax code and recover the owed tax via your tax code at work. So for the 2025/26 year this would be about Dec 2026.

If you have savings interest of £10,000 or more you are required to do a self assessment. When you do this you will be given a figure to pay or can ask for it to be taken via your tax code.

ISAs are tax free savings so it makes sense to keep some savings in ISAs to reduce any tax liability.

Thanks everyone for the advice. Much appreciated.