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The short answer
The Personal Savings Allowance lets basic rate taxpayers earn £1,000 of interest a year tax-free, higher rate taxpayers £500 and additional rate taxpayers nothing, and people on low earnings may also get up to £5,000 under the starting rate for savings. A cash ISA matters once your interest is likely to pass those limits, because ISA interest is tax-free whatever your income, within the £20,000 annual ISA allowance.
A Nigerian professional who arrives in the UK often brings savings, or builds them quickly: a house deposit, an emergency fund, money for school fees at home. Banks push both ISAs and ordinary savings accounts. Which one you choose only matters if the interest would otherwise be taxed, and for many people it would not.
The Personal Savings Allowance
GOV.UK sets out how much savings interest is tax-free each year:
| Your Income Tax band | Personal Savings Allowance |
|---|---|
| Basic rate | Up to £1,000 of interest |
| Higher rate | Up to £500 |
| Additional rate | £0 |
The allowance applies to interest from bank and building society accounts, including ordinary savings accounts. It does not apply to interest inside an ISA, which is tax-free anyway.
The starting rate for savings
If your other income, such as wages, is under £17,570, you may also get up to £5,000 of interest tax-free under the starting rate for savings. That £5,000 shrinks by £1 for every £1 of other income above your Personal Allowance of £12,570. This often helps a dependant spouse working part time.
Three worked examples (illustrative)
Basic rate saver
Example: £20,000 saved at an illustrative 4% earns £800 a year. That is under the £1,000 allowance, so no tax is due, and an ordinary savings account does the same job as a cash ISA this year.
Higher rate saver
Example: the same £800 for someone earning above £50,270. Only £500 is covered, so £300 is taxed at 40%, which is £120. Held in a cash ISA, the same interest would be tax-free.
Part-time earner
Example: a spouse earns £13,000. That is £430 above the Personal Allowance, so the starting rate band is £5,000 minus £430, which is £4,570. Add the £1,000 Personal Savings Allowance and up to £5,570 of interest could be tax-free. Couples sometimes hold savings in the lower earner's name for this reason; each person's money must really be theirs.
When a cash ISA matters
GOV.UK says the ISA allowance for 2026 to 2027 is £20,000, which can be split across cash, stocks and shares, innovative finance and Lifetime ISAs, and across more than one cash ISA in the same year. You must be 18 or over and UK resident, and ISAs cannot be held jointly. A cash ISA is worth choosing when:
- your interest will pass your Personal Savings Allowance, as for most higher rate taxpayers with a sizeable balance;
- you expect your income or savings to grow, because money sheltered now stays tax-free in later years;
- the cash ISA rate is close to or better than the ordinary account rate, so there is nothing to lose.
- you want to keep using this year's allowance, which is lost if not used by 5 April.
An ordinary account is often fine when your interest is comfortably inside the allowance and the best rate on offer is outside an ISA. Compare the rates, not the labels.
Two points for Nigerians in particular
- Interest from Nigerian accounts. If you are UK resident, interest from a naira account or Nigerian fixed deposit may need to be considered for UK tax too. Our guide UK ISA or naira savings explains the reporting side.
- Leaving the UK. You can keep an ISA after you stop being resident but cannot pay in; see what happens to an ISA if you leave.
Fixed-rate bonds and the timing trap
Ask how and when a fixed-rate bond pays its interest. If a two year bond pays everything at maturity, two years of interest can arrive in one tax year and push you over your allowance, even if each year on its own would have been under. Some bonds offer monthly or annual interest instead. If you are close to the limit, check how and when interest is paid before you lock money away, or hold the fixed-rate product inside a cash ISA, where the timing does not matter.
If tax is due
GOV.UK's guide to tax on savings interest explains how tax above your allowance is paid, which differs for people who file Self Assessment. Whatever applies to you, keep each year's interest statements from every bank, in the UK and in Nigeria, so the figures are easy to check.
Safety of the money
Deposits in UK banks and building societies, ISA or not, are protected by the FSCS up to £120,000 per eligible person per authorised firm. Banks that share a licence count as one firm, so spread large sums with that in mind.
Where Pryme fits
Pryme does not offer UK ISAs. It suits the other half of a two-country plan: a Personal Account that holds GBP and NGN together (multicurrency), and naira Savings Boxes for money held in Nigeria, with rates shown in the app. See splitting savings between pounds and naira.
Questions people ask
How much interest can I earn tax-free in the UK?
£1,000 a year for basic rate taxpayers, £500 for higher rate and nothing for additional rate, under the Personal Savings Allowance. Low earners may get up to £5,000 more under the starting rate for savings.
Is a cash ISA worth it for a basic rate taxpayer?
Only if your interest would exceed £1,000, or the ISA pays a similar or better rate. Otherwise an ordinary savings account can do the same job.
Can I open a cash ISA on a visa?
GOV.UK's rules are age 18 or over and UK residence, not visa type. Banks check identity and right to reside when you open an account.
What is the ISA allowance for 2026/27?
£20,000, across all your ISAs, according to GOV.UK.
Sources
- GOV.UK: Tax on savings interest, how much is tax free (updated 30 Sep 2026) · accessed Oct 2026
- GOV.UK: Individual Savings Accounts (updated 30 Sep 2026) · accessed Oct 2026
- GOV.UK: Individual Savings Accounts, if you move abroad · accessed Oct 2026
- FSCS: Check your money is protected · accessed Oct 2026
- GOV.UK: Income Tax rates and Personal Allowances · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.