UK Savings & Dividend Allowance Optimiser

Section 12 of the Income Tax Act 2007 gives a £5,000 0% rate band that sits BETWEEN the personal allowance and the basic rate band — but only on savings interest. It is tapered £-for-£ by every pound of taxable non-savings income above the personal allowance, so once your salary, pension or self-employed profit exceeds £17,570 (PA + £5,000) the starting rate disappears completely. It is most useful for low-earners, retirees living off interest, and people on career breaks.

The Personal Savings Allowance (PSA) is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and £0 for additional-rate taxpayers. It is a 0% rate band — your interest still uses up that band of taxable income, but you pay no tax on it. It applies to interest from banks, building societies, gilts and most savings accounts, but not to ISAs (which are already tax-free) or to dividends.

The Dividend Allowance is £500 (2024/25 onwards) and is also a 0% rate band — separate from the PSA, separate from the SRS. It applies to dividend income only and does not depend on your tax band. After the £500, dividends are taxed at 8.75% / 33.75% / 39.35% in 2025-26; from 6 April 2026 (2026-27) the basic and higher dividend rates rose 2pp to 10.75% / 35.75%, with the additional rate unchanged at 39.35%, per Autumn Budget 2025 (Finance (No.2) Bill 2024-26).

Yes. Finance Act 2026 gives savings income its own rates for 2027-28: 22% basic, 42% higher and 47% additional, up from 20% / 40% / 45%. The starting rate for savings and the Personal Savings Allowance do not change, and the rise applies across the UK, including Scotland and Wales. Only interest above your allowances costs more: 2p per £1 of taxable interest. The calculator shows your figure for April 2027 under the total. Interest inside an ISA stays tax-free.

Section 16 of the Income Tax Act 2007 sets the order: non-savings income first (employment, SE, pension, rental), then savings interest, then dividends — each filling tax bands on top of the previous one. Within each column the allowances apply in their natural order: PA → SRS (savings only) → PSA (savings only) → Dividend Allowance (dividends only) → basic-rate band → higher-rate band → additional-rate band.

Yes — choose Scotland in the calculator. Scottish rates apply only to non-savings income (salary, pension, self-employment, rental), so that column is taxed on the Scottish starter, basic, intermediate, higher, advanced and top rates. GOV.UK confirms Scottish taxpayers pay the same tax as the rest of the UK on dividends and savings interest, and the law goes further: savings and dividends are placed in the UK basic-rate and higher-rate bands as if you were not a Scottish taxpayer (Income Tax Act 2007 s11D(6)), and your Personal Savings Allowance tier is set on those UK bands too (s12B(8)). So a Scot paying the Scottish higher rate on part of their salary can still get the full basic-rate Personal Savings Allowance if their total taxable income is inside the UK basic-rate band.

Section 35 ITA 2007: above £100,000 of adjusted net income, your personal allowance is reduced by £1 for every £2 of income, vanishing at £125,140. Combined with 40% income tax, this creates a 60% effective marginal rate in the £100k–£125,140 band. A £5,000 pension contribution there saves £3,000 — not £2,000.