MoneyHMRCThe tax rules and allowances differ depending on your situationNicholas Dawson08:44, 30 May 2026HMRC has released an update to clarify how tax rules apply to pensioners. Now is a good time to check the rules as the rates you have to pay are set to rise shortly.‌A person contacted the tax authority via social media seeking clarification on how the rules operate. They asked: "Can you confirm that a pensioner does not have to pay tax on the first £1,000 of interest earned on savings." In accordance with the personal savings allowance, those on the basic rate of income tax can earn up to £1,000 in savings interest each tax year completely tax-free. However, the allowance is halved for higher rate taxpayers, dropping to £500, while those on the additional rate receive no allowance whatsoever and must pay tax on all interest earnings.‌This differs from savings accumulated in cash ISAs, where all interest earnings are entirely exempt from tax. Similarly, stocks and shares held within an ISA wrapper are free from tax on any investment growth.‌Tax rules explainedResponding to the query, HMRC spelled out the rules. It said: "Pensioners have the same rules as everyone else. So if they are a basic rate taxpayer only, then yes they have a £1,000 tax-free allowance."State Pensioners to face major tax changeThe rate applied to any taxable interest mirrors your income tax rate, meaning basic rate taxpayers pay 20 per cent, higher rate taxpayers pay 40 per cent, and those on the additional rate pay 45 per cent.‌However, it is worth bearing in mind that the rules are set to change in the near future. From April 2027, the rate paid on interest earnings will rise by two percentage points, meaning those on the basic rate will see it climb to 22 per cent.Higher rate taxpayers will face an increase to 42 per cent, while those on the additional rate will be required to pay 47 per cent. Further changes arriving in April 2027 could also push up the tax you pay on your savings.Article continues belowTax allowance changes coming upThe ISA allowance is effectively being reduced. At present, you can deposit £20,000 into ISAs and divide this however you wish between cash ISAs and stocks and shares ISAs.Under the new regulations, however, you will only be able to allocate up to £12,000 of the allowance as you see fit. The remaining £8,000 must be placed into stocks and shares ISAs.That said, many older savers will be exempt from these new rules. Those aged 65 and over will keep the existing £20,000 allowance.Choose Daily Mirror as a 'Preferred Source' on Google News for quick access to the news you value.‌PensionsTaxCash ISAISAsHMRC