How interest income becomes a taxable amount and then a net figure, line by line, from the values you entered. Interest is added to your income and taxed at your marginal rate, not a capital gains rate.
Step
Amount
Interest income
20,000
Less: exemption
−0
Taxable interest
20,000
Tax at marginal rate (30%)
−6,000
Net interest income
14,000
Estimates only — not financial, tax, or professional advice.
100% private — every number you enter is calculated in your browser and never sent to our servers.
What it calculates: Tax on Interest, Net Interest Income, Taxable Interest.
Updated 5 June 2026 · Transparent assumptions
The marginal rate is the one that applies, and it is the highest one
Interest is added on top of your other income, so it is taxed in your highest band rather than at your average rate. Someone whose overall effective rate is 18% may still pay 30% on deposit interest, because that interest sits in the top slice of the year’s income.
This is why the rate to enter is the marginal one. Using an average rate understates the tax, often substantially, and produces a net figure that will not match what actually arrives.
A 7% deposit at a 30% rate is 4.9%, and inflation takes it from there
Tax turns a headline rate into a materially lower one: 7% at a 30% marginal rate nets 4.9%. If prices are rising 6%, the real return on that deposit is negative — the balance grows while the purchasing power shrinks.
That is the honest case against holding long-term savings in interest-bearing deposits at high marginal rates, and it is the reason tax-free instruments can beat higher-yielding taxable ones. The tax-equivalent yield calculator puts the two on the same footing.
The exempt slice comes off before the rate is applied
Many systems exempt a first tranche of interest or savings income, sometimes with a larger allowance for older taxpayers or for particular account types. The exemption field takes that figure off the income before tax is computed, which is the correct order.
The amounts and eligibility vary widely and change with budgets, so enter the allowance that applies to you rather than a remembered figure. Where an allowance is per-person, joint accounts may need splitting before the calculation.
The bank may deduct less, or more, than you owe
Banks in many jurisdictions withhold tax on interest at a flat statutory rate once it passes a threshold. That rate rarely equals your marginal rate, so the withholding is a payment on account rather than a settlement — a higher-rate taxpayer still owes the difference, and a lower-rate one may be due a refund.
This calculator computes the liability, not the balance outstanding. Subtract whatever has already been withheld to get the amount still payable, and keep the withholding certificates, since claiming credit for tax already deducted usually requires them.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Tax rules vary by country, state, tax year, filing status, income type, deductions, and exemptions. This calculator is educational and uses the values you enter. Always verify final tax treatment with official sources or a qualified tax professional.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested the exemption applied before the marginal rate, with the tax and the net interest recomputed from the inputs.
Tested that an exemption at or above the interest leaves no tax, and that the net amount always equals the interest less the tax.
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