Retirement can mean receiving income from several different sources. Alongside your State Pension or private pension, you may also have savings accounts, investments or shares that provide interest or dividends.
Understanding how these different types of income are treated for tax can help you keep on top of your tax affairs and understand when you may need to provide information to HMRC.
Do I need to complete a Self Assessment tax return?
Not everyone who is retired and receives savings interest or dividends needs to complete a Self Assessment tax return.
HMRC looks at your individual circumstances and the different types of income you receive.
For example, you might receive:
- State Pension
- A workplace or private pension
- Interest from savings accounts
- Dividends from shares
- Other investment income
The rules can be different depending on the type and amount of income you receive.
If you are required to register for Self Assessment for the first time for the 2025/26 tax year, 5 October 2026 is an important date to be aware of.
What about interest from my savings?
Interest from ordinary bank and building society accounts can be taxable.
However, there are allowances that may mean you can receive some interest without paying tax.
For the 2025/26 tax year, the Personal Savings Allowance is:
| Tax band | Personal Savings Allowance |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
There can also be a starting rate for savings in certain circumstances.
Interest earned within an ISA is normally tax-free.
HMRC adds together the interest you receive from your different savings accounts when working out your total savings interest.
When does savings interest need to be reported?
HMRC states that you need to register for Self Assessment if your income from savings and investments is more than £10,000.
This is a reporting threshold — it does not mean that £10,000 of savings interest is automatically taxable.
The amount of tax you actually pay depends on your overall income, tax band and the allowances available to you.
A simple example
Imagine you are retired and receive a pension that makes you a basic-rate taxpayer. You receive £800 interest from your ordinary savings accounts during the tax year.
The Personal Savings Allowance for a basic-rate taxpayer is £1,000, so the £800 interest would normally fall within your allowance.
If your savings interest was £1,300 instead, the first £1,000 would fall within your Personal Savings Allowance and the remaining £300 would normally be taxable.
Your own position will depend on your total income and circumstances.
What about dividends from shares?
If you own shares in companies, you may receive dividend payments.
Dividends are treated differently from savings interest.
For the 2025/26 tax year, the dividend allowance is £500. Dividends above the allowance may be taxable, depending on your overall income and tax band.
Dividends from investments held within an ISA are not taxable.
It is also worth remembering that owning shares in a UK company does not automatically make the dividends tax-free. The way the shares are held and the amount of dividend income you receive are important factors.
When do dividends need to be reported?
There are separate reporting rules for dividend income.
If your dividend income is more than £10,000, HMRC says you need to complete a Self Assessment tax return. If you do not normally send a tax return, you need to tell HMRC after the end of the tax year and before 5 October.
If your dividend income is £10,000 or less, you may still need to tell HMRC about it depending on your circumstances. If you already complete a Self Assessment tax return, you should include your dividend income on it.
An important point about the £10,000 thresholds
The £10,000 savings and investment income threshold and the £10,000 dividend reporting threshold should not be treated as one combined £10,000 allowance.
HMRC has separate guidance for savings and investment income and for dividend income.
The amount of income you receive and the type of income can affect whether you need to register for Self Assessment and how much tax you may have to pay.
What if I have both savings and dividends?
It is quite common for someone in retirement to have both savings and investments.
For example, you might receive:
£8,000 from savings interest
£3,000 from dividends
Plus your pension income
This does not mean that you simply add the two amounts together and compare them with one £10,000 threshold.
The rules for savings interest and dividends are different, and your overall tax position depends on your individual circumstances.
This is why it can be helpful to look at all of your sources of income together rather than considering each one in isolation.
What if HMRC contacts me about my savings interest?
HMRC receives information about interest paid by banks and building societies.
If HMRC has information showing that you may have tax to pay on savings interest, they may send you a tax calculation rather than requiring you to complete a Self Assessment tax return.
HMRC may also use Simple Assessment to tell you about tax that is due and how to pay it.
Receiving a letter or calculation from HMRC does not necessarily mean that you have done anything wrong. It may simply mean HMRC has received information about your income and has calculated that some tax may be due.
Keeping your records
If you receive income from savings or investments, it is a good idea to keep your paperwork together.
This might include:
- Bank and building society interest statements
- Dividend statements
- Details of shares and investments
- Pension information
- ISA statements
- Any letters or calculations received from HMRC
Keeping these records makes it easier to understand your tax position and provide the correct information if you need to complete a tax return.
Retirement doesn’t mean your tax affairs have to be complicated
For many people, retirement brings a change in the way their income is received.
You may no longer have employment income, but instead receive income from pensions, savings and investments.
Understanding how each type of income is treated can make it much easier to keep your tax affairs organised.
You may not need to complete a Self Assessment tax return, but if your circumstances have changed or you are receiving income from several sources, it is worth checking your position.
Need help understanding your Self Assessment position?
Tax rules can seem complicated when you have income from several different sources.
If you are retired, approaching retirement, or simply have questions about savings interest, dividends or Self Assessment, Mays Accounting Services can help you understand what information you need and prepare your Self Assessment tax return where required.
If you are unsure about your tax position, please get in touch.
Mays Accounting Services – making accounting simple for you.
The information in this article relates to the 2025/26 tax year and is intended as general guidance. Tax treatment depends on individual circumstances and HMRC rules can change. For specific advice about your circumstances, please contact Mays Accounting Services or check the latest HMRC guidance.