Joint Bank Account Interest Tax UK: 2025/26 Rules

This guide outlines the 2025/26 tax rules for joint bank account interest in the UK. Discover how HMRC treats interest splits, how the Personal Savings Allowance applies to individual earners, and how to claim unequal beneficial ownership using Form 17.

Interest from a joint bank account is split between account holders for tax purposes. By default, HM Revenue and Customs (HMRC) divides this interest equally (50/50) between both individuals. Each person is then assessed and taxed on their respective share dynamically based on their individual tax rate and personal allowances for the 2025/26 tax year.

Key Takeaways: Joint Account Interest Tax

• 50/50 Default Rule: HMRC splits all joint account interest equally by default for spouses and civil partners.
• Form 17 Option: Married couples can opt to tax their actual, unequal ownership split under strict criteria.
• Individual Personal Allowance: Every individual receives a £12,570 Personal Allowance for 2025/26.
• Personal Savings Allowance: Basic rate taxpayers enjoy £1,000 of tax-free interest; higher rate taxpayers get £500.

How is joint account interest taxed in the UK?

Joint account interest is taxed by allocating a percentage of the total interest to each account holder to be taxed as individual income.

HMRC applies a standard default split of 50/50 to the interest earned on joint accounts, regardless of who originally deposited the funds. Once the total interest is divided half-and-half, each individual applies their own Personal Savings Allowance (PSA) and personal tax rates to their resulting portion of the earnings.

Because each individual is assessed independently, one partner may pay no tax on their half of the interest while the other pays their statutory marginal rate of 20%, 40%, or 45%, depending on their total annual income.

What is the joint account interest tax rule?

The joint account interest tax rule dictates that income from jointly held property is treated as belonging to spouses or civil partners in equal shares.

According to Income Tax Act (ITA) 2007 s.836, married couples and civil partners who live together are legally deemed to receive joint bank account interest on a strict 50/50 basis. This statutory rule applies automatically unless a formal declaration of unequal ownership has been validly submitted to HMRC.

For unmarried individuals, HMRC also typically defaults to a 50/50 split for administrative ease, though these individuals are technically assessed on their actual beneficial ownership proportions without needing a statutory declaration.

How to change the split for unequal ownership (Form 17)

Married couples and civil partners can change the default 50/50 interest split by submitting a formal Form 17 declaration to HMRC.

Under ITA 2007 s.837, you may only declare unequal shares for tax purposes if your actual beneficial ownership of the underlying assets matches the split you are claiming. You cannot choose an arbitrary percentage split simply to reduce your joint tax bill.

1. Ensure you hold the underlying joint bank account funds in unequal shares.
2. Complete and sign Form 17 alongside your spouse or civil partner.
3. Submit the completed form directly to HMRC within 60 days of the date it was signed.
4. Provide supporting evidence of the unequal beneficial ownership when submitting the declaration.

Personal Savings Allowances for 2025/26

Before paying joint interest tax, individuals utilize their applicable tax allowances, which vary based on total income levels.

Worked example: How the tax is calculated

To understand how the joint interest tax is calculated, consider a joint account that generates £1,800 of interest during the 2025/26 tax year.

Under the standard 50/50 allocation rule, both partners are allocated £900 of savings interest to report on their individual tax profiles.

• Scenario A (Two Basic Rate Taxpayers): Each partner holds a £1,000 PSA. Since £900 is less than £1,000, neither partner pays tax on the joint account interest.
• Scenario B (One Basic, One Higher Rate Taxpayer): The basic rate partner pays £0 tax due to their £1,000 PSA. The higher rate partner has a £500 PSA, leaving £400 taxable. This £400 is taxed at 40%, resulting in £160 tax owed.
• Scenario C (One Additional Rate Taxpayer): The additional rate partner receives a £0 PSA. Their full allocated £900 share is taxed at 45%, resulting in £405 tax owed.

How does HMRC collect tax on savings interest?

HMRC primarily collects tax on savings interest automatically through tax code adjustments or via the Self Assessment filing processes.

For employees or pension recipients under Pay As You Earn (PAYE), HMRC updates your tax code automatically. Banks report interest payments directly to HMRC, which triggers these adjustments or generates a Simple Assessment tax letter.

You must check the figures on your Simple Assessment carefully, as joint interest processing is a frequent source of HMRC administrative errors. If your personal savings interest exceeds £10,000, or you do not pay tax through PAYE, you must declare it using a Self Assessment tax return.

Tax planning strategies for couples

There are several tax planning strategies available to couples looking to minimize their collective tax burden on savings interest.

• Transfer Savings: Relocating joint savings to the partner in the lower tax bracket maximizes the use of larger Personal Savings Allowances.
• Utilise Cash ISAs: Hold savings within individual Cash ISAs where all interest earned is completely tax-free up to the £20,000 limit per person for 2025/26.
• Claim Marriage Allowance: Eligible couples can transfer up to £1,260 of their unused Personal Allowance if one spouse earns under the tax-free personal allowance threshold.

What is the tax on interest from a joint bank account in the UK?

Joint account interest is taxed by splitting the total interest equally between both holders. Each individual then uses their personal allowances to offset their 50% share, paying their marginal income tax rate on any remainder.

Can couples avoid the 50/50 default tax split on savings interest?

Yes. Married couples and civil partners can submit Form 17 to HMRC to declare and tax their actual, unequal beneficial ownership split of the joint savings account.

How much savings interest can I earn tax-free in 2025/26?

You can earn up to £1,000 tax-free as a basic rate taxpayer or £500 as a higher rate taxpayer via the Personal Savings Allowance. Additional rate taxpayers receive £0.

Does joint account interest count towards my Personal Savings Allowance?

Yes. Your proportional share of the joint account interest counts directly towards your individual Personal Savings Allowance alongside any personal interest you earn.

How does HMRC know about interest earned on joint accounts?

Banks and building societies in the UK are legally required to report all interest paid on individual and joint accounts directly to HMRC at the end of each tax year.