Earning Over £100,000? What Higher Savings Tax Could Mean for You

Tax Queen

Tax Expert @ Pie

3 min read

What You Need to Know

If your income is between £100,000 and £125,140, reports say savings interest in that band could soon face an effective tax rate of 64%. [Editor Note: Unverified figure - check against HMRC guidance] The rule behind this isn't new. You may be able to soften it by lowering your adjusted net income before the tax year ends on 5 April 2027.

If you file a Self Assessment return, your savings interest goes on it alongside your self-employed or rental profits. Keeping a clear record of the interest each account pays you is a sensible first step.

What the Savings Tax Change Involves

Reports of last week's Autumn Budget say the savings tax rate for higher-rate taxpayers will rise by four percentage points, from 40% to 44%, from April. [Editor Note: Unverified figure - check against HMRC guidance] The government's Budget 2025 document had already said it would raise taxes on property, dividend and savings income.

Until HMRC publishes the final rates, treat the 44% figure as reported, not confirmed. If the rise goes ahead, setting money aside early will make the bill easier to manage. Our guide on how to budget for your Self Assessment tax bill walks you through how to do that.

Why Income over £100,000 Is Hit Hardest

Your Personal Allowance is the £12,570 you can earn each year before you pay Income Tax. Once your adjusted net income goes above £100,000, you lose £1 of that allowance for every £2 over the limit. By £125,140, it has gone completely.

Adjusted net income is broadly your total taxable income, including trading profits, rent and savings interest, minus certain reliefs such as pension contributions and Gift Aid donations. Because you lose the allowance as your income rises, income in this band is effectively taxed at 60% today. Reports suggest this could reach 64% on savings interest under the new rate.

Ways to Bring Your Income Below the Threshold

Paying more into a personal pension reduces your adjusted net income, which can win back some or all of your allowance. Gift Aid donations work in a similar way. It's worth knowing how backdating Gift Aid donations works on your Self Assessment return.

If you're self-employed, your profits for the year largely decide whether you cross the threshold. Keeping your records up to date through the year shows you early if you're getting close to £100,000, while you still have time to act.

Getting Your Figures Ready Before the Year Ends

Whether or not the 44% rate is confirmed, it pays to know your numbers before 5 April 2027. Keep your bank interest statements, pension contribution records and Gift Aid receipts together with your trading or rental records for 2026-27.

If you're a sole trader, freelancer or landlord near the threshold, Pie Tax is self-assessment software that pulls your income into one place and sorts your allowable expenses. That lets you see how close your profits are getting to £100,000 and plan any pension or Gift Aid payments in good time.

Having your records in one place now means fewer surprises when you file your return. Try Pie Tax for free and check where you stand for this tax year.