Interest on £20,000 Savings (2026/27)
£20,000 earning 4% a year pays £800 in interest. Here is what you would earn at other rates, and how much is taxed.
Interest on £20,000 a year
| Interest rate | Interest a year | A month | Tax if basic rate taxpayer | Tax if higher rate taxpayer |
|---|---|---|---|---|
| 2% | £400 | £33 | £0 | £0 |
| 3% | £600 | £50 | £0 | £40 |
| 4% | £800 | £67 | £0 | £120 |
| 5% | £1,000 | £83 | £0 | £200 |
| 6% | £1,200 | £100 | £40 | £280 |
Tax figures use the Personal Savings Allowance only (£1,000 basic rate, £500 higher rate). Many people also have a starting rate for savings of up to £5,000; use the savings interest tax calculator for your own figures.
See how £20,000 grows over time
Savings in an ISA
You can save up to £20,000 a year in ISAs and the interest is tax-free. £20,000 fits within the yearly ISA allowance, so all of the interest could be tax-free.
Why the interest rate matters more than it looks
Over ten years at 4% with interest added each year, £20,000 grows to about £29,605, against £24,380 at 2%. Inflation reduces what the money can buy, so a rate below inflation loses value in real terms.
Nearby amounts
Figures assume a fixed rate for a full year. Source: GOV.UK: Tax on savings interest. This is not financial advice.
Frequently asked questions
How much interest will £20,000 earn in a year?
At 4% a year, £20,000 earns £800 in interest, or £67 a month. At 5% it earns £1,000.
Do I pay tax on interest on £20,000?
At 4% the interest of £800 is above the Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate), so a basic rate taxpayer would pay about £0 and a higher rate taxpayer about £120, before any starting rate for savings. Interest in an ISA is always tax-free.
How can I avoid tax on savings interest?
Use a cash ISA, which allows up to £20,000 a year across all your ISAs. Interest is tax-free and does not count towards your allowance.
How long to double £20,000?
The rule of 72: divide 72 by the interest rate. At 4% it takes about 18 years to double £20,000 with interest left in.
Figures are for the 2026/27 tax year from official sources and are estimates for guidance only, not financial or legal advice. Printed from ukanswers.co.uk.