A new tax update linked to savings income has drawn attention across the UK, with the headline figure of £18,570 being widely discussed. For pensioners, savers and part‑time workers alike, understanding how this number works could make a real difference to how much tax you pay in 2026.
But what exactly does the £18,570 tax‑free figure mean? Is it a brand‑new Personal Allowance? Does everyone qualify? And how do savings rules fit into the picture?
Here is a clear and comprehensive breakdown written specifically for UK readers who want straightforward answers without complicated tax language.
What Is the Personal Allowance
In the UK, most people can earn a certain amount of income each year before paying Income Tax. This is called the Personal Allowance.
The allowance is set and administered by HM Revenue and Customs and applies to income such as wages, pensions and some taxable benefits.
If your total taxable income stays below the Personal Allowance, you do not pay Income Tax.
Understanding the £18,570 Figure
The £18,570 figure does not replace the standard Personal Allowance on its own. Instead, it reflects how different tax‑free allowances can work together under savings rules.
For many people, the standard Personal Allowance is combined with:
The Starting Rate for Savings
The Personal Savings Allowance
When these elements are added together in certain circumstances, a person with modest earned income and savings interest could effectively receive up to £18,570 before paying tax on that interest.
It is not a universal flat allowance for everyone — it depends on how your income is structured.
Breaking Down the Savings Rule
There are three main components involved:
Personal Allowance
Starting Rate for Savings
Personal Savings Allowance
Let’s look at each one clearly.
Personal Allowance Explained
The Personal Allowance is the amount of income you can earn before Income Tax applies.
This applies to income such as:
Employment income
Private pensions
The State Pension
Rental income
If your income exceeds this allowance, you pay tax on the amount above it.
Starting Rate for Savings
The Starting Rate for Savings allows eligible individuals to earn up to £5,000 in savings interest tax‑free, depending on how much non‑savings income they receive.
If your non‑savings income is low, you may benefit from this additional tax‑free band.
However, this £5,000 allowance reduces by £1 for every £1 your non‑savings income exceeds the Personal Allowance.
Personal Savings Allowance
In addition, basic‑rate taxpayers can earn up to £1,000 in savings interest tax‑free under the Personal Savings Allowance.
Higher‑rate taxpayers receive a smaller allowance, and additional‑rate taxpayers receive none.
When combined strategically, these allowances can create a tax‑free savings window reaching £18,570 in certain situations.
Example Scenario
Imagine Margaret receives:
A modest private pension
The State Pension
Savings interest from a bank account
If her non‑savings income remains relatively low, she may be able to use:
Her full Personal Allowance
The Starting Rate for Savings
The Personal Savings Allowance
In this situation, her total income plus savings interest could reach £18,570 before Income Tax is due on savings income.
Now consider David, who has higher employment income. His Starting Rate for Savings may be reduced or eliminated, meaning he cannot benefit from the full £18,570 structure.
The rule is income‑dependent.
Why This Matters for Pensioners
Many pensioners rely on:
State Pension
Small workplace pensions
Interest from savings
As interest rates have risen in recent years, savings income has increased for many retirees.
Without understanding the savings rule, some may worry unnecessarily about tax bills.
The £18,570 figure highlights how multiple allowances can protect modest savers from paying tax on interest.
Does This Apply Automatically
Yes. These allowances apply automatically through the tax system.
Banks and building societies usually report interest to HMRC.
If tax is due, HMRC may adjust your tax code or issue a calculation.
You do not need to submit a claim for the Starting Rate or Personal Savings Allowance.
Checking Your Tax Position
It is wise to:
Review your total income
Check how much interest you are earning
Confirm your tax code is accurate
If your income changes — for example, if you withdraw a lump sum from a pension — your tax situation could shift.
Understanding how savings interact with your main income helps avoid surprises.
Common Misunderstandings
Some headlines suggest that the Personal Allowance itself has been raised to £18,570.
This is not accurate.
The £18,570 figure represents a combined tax‑free scenario for specific income structures involving savings.
It does not mean everyone can earn £18,570 of salary tax‑free.
Impact on Working People
The savings rule does not apply only to pensioners.
Working individuals with low earnings and modest savings may also benefit.
For example:
Part‑time workers
Carers with limited employment income
People easing into retirement
If earned income remains low enough, the Starting Rate for Savings may still apply.
What About Couples
Tax allowances are applied individually.
If both partners have savings and low incomes, each may benefit separately.
Joint accounts may split interest between account holders for tax purposes.
Understanding whose name is on the account can matter.
Interaction With Other Allowances
In addition to the savings rule, you may also benefit from:
Marriage Allowance
Blind Person’s Allowance
Dividend Allowance
Each operates separately within the tax framework.
However, the savings rule specifically relates to interest from bank accounts and similar products.
Avoiding Over‑Taxation
If too much tax is deducted or your tax code is incorrect, you may be entitled to a refund.
This often occurs when:
Income fluctuates during the year
A pension starts or stops
Savings income changes unexpectedly
Checking your annual tax summary can help ensure accuracy.
Planning Ahead
If you are approaching retirement or restructuring your finances, consider:
Spreading pension withdrawals across tax years
Keeping some savings in tax‑efficient accounts
Understanding how interest income affects thresholds
Strategic planning can help maximise tax‑free income.
Why the Announcement Is Significant
The confirmation of the £18,570 figure under savings rules reassures many savers that modest income combined with interest can remain largely tax‑free.
At a time when living costs remain a concern, clarity around tax‑free income provides welcome certainty.
For pensioners especially, knowing that savings interest may not automatically trigger a tax bill offers peace of mind.
Key Points to Remember
The £18,570 figure reflects combined allowances under savings rules.
It does not replace the standard Personal Allowance.
Eligibility depends on income structure.
Savings interest can be tax‑free under specific conditions.
The rule applies automatically through HMRC systems.
What You Should Do Now
Review your total annual income.
Estimate your expected savings interest.
Check whether your non‑savings income affects the Starting Rate for Savings.
Monitor official communications from HMRC.
Being informed helps you stay in control of your finances.
Final Thoughts
Tax headlines can sometimes create confusion, particularly when large figures such as £18,570 are involved. However, when broken down clearly, the savings rule simply allows modest earners and pensioners to combine several existing allowances to protect savings interest from tax.
For many households, this structure ensures that small pensions and savings do not immediately lead to tax liability.
Understanding how these allowances interact is key. With careful planning and awareness, you can make the most of the tax‑free opportunities available and ensure you are not paying more than necessary.
As always, if your financial circumstances are complex, seeking guidance from a qualified adviser can provide additional reassurance.