Tax on Savings Interest 2026
Interest from instant-access, fixed-term and ordinary savings accounts is typically treated as investment income and taxed — but the exact rate and allowance vary by country. In Germany, for example, interest faces a flat capital-gains tax of roughly 26.375%, with the first €1,000 per person tax-free. With the ECB’s June 2026 hike (deposit rate around 2.25%) finally making cash pay again, more savers are crossing into taxable territory.
🌍 The rules vary by country
There is no single “Europe-wide” rule for taxing savings interest. Most countries treat interest as investment income and apply either a flat rate with a tax-free allowance, or fold it into a separate savings tax base with progressive brackets. The common thread: once your cash starts paying meaningful interest, part of it usually becomes taxable. Below we use Germany as a detailed worked example, then flag how Spain and Italy differ.
Germany as a worked example
In Germany, interest from Tagesgeld (instant-access), Festgeld (fixed-term) and savings accounts counts as a capital gain and is subject to the Abgeltungsteuer of 25 %, plus a 5.5 % solidarity surcharge on the tax itself — an effective rate of about 26.375 %. Members of a church pay additional church tax, pushing the total to roughly 27.99 %.
Crucially, a tax-free allowance (Sparerpauschbetrag) of €1,000 per person (€2,000 for married couples) applies each year. Only interest above that threshold is taxed. To use it, savers file a Freistellungsauftrag (exemption order) with their bank; German banks then withhold the tax automatically and only on amounts above the allowance.
Germany example: €1,500 interest, single saver (as of June 2026)
| Situation | Taxable interest | Tax (26.375 %) | Net interest |
|---|---|---|---|
| With exemption order (€1,000) | €500 | ~€131.88 | ~€1,368 |
| Without exemption order | €1,500 | ~€395.63 | ~€1,104* |
*Without an exemption order you reclaim the over-withheld amount via your annual tax return — the allowance is not lost, but you have to act.
Interest from foreign banks is still taxable
A frequent trap: interest earned at foreign banks — for instance via deposit platforms (such as Raisin/WeltSparen) or brokers that route cash to EU partner banks — is not withheld automatically at source. In Germany, savers must declare it themselves in the Anlage KAP of their tax return. The principle generalises: in most countries, interest from foreign accounts is just as taxable as domestic interest, and the duty to report it often falls on you. Always check your own country’s rules.
This page uses Germany only as an example. In Spain, interest is taxed in the savings base of the IRPF at progressive rates from 19 % to 28 %, with no German-style €1,000 allowance, and is declared in the Renta. In Italy, interest from deposit and current accounts is taxed at a flat 26 % substitute tax, plus a 0.2 % annual stamp duty (imposta di bollo) on the balance. Always check the rules in your country of tax residence — this article is general information, not tax advice.
Why this matters in 2026
After the ECB’s first rate hike since 2023 (deposit rate around 2.25 %), instant-access and fixed-term accounts finally pay noticeable interest again. On larger balances, a fixed allowance like Germany’s €1,000 is used up quickly — pushing many savers back into taxable territory for the first time in years. Knowing how interest is taxed where you live, and reporting foreign interest correctly, avoids both overpaying and nasty surprises from the tax office.
FAQ — Tax on savings interest 2026
Is savings interest taxable?
In most countries, yes — interest from instant-access, fixed-term and savings accounts is generally treated as investment income and taxed. The exact rate and any tax-free allowance vary by country. In Germany, for example, interest faces a flat tax of about 26.375 %, with the first €1,000 per person tax-free; Spain and Italy use different systems. Check the rules in your country of tax residence.
How is savings interest taxed in Germany?
Interest is subject to the Abgeltungsteuer of 25 % plus a 5.5 % solidarity surcharge — an effective rate of roughly 26.375 %, or up to about 27.99 % with church tax. However, a tax-free allowance of €1,000 per person per year (€2,000 for married couples) applies. To use it, you file an exemption order with your bank, which then withholds tax automatically only on amounts above the allowance.
Do I have to declare interest from foreign banks?
Usually yes. Interest earned at foreign banks — for example via deposit platforms or brokers routing cash abroad — is typically not withheld at source for your home tax authority, so the duty to report falls on you. In Germany you declare it in the Anlage KAP of your tax return. Foreign withholding tax already paid can often be credited. Confirm the procedure in your own country.
How do Spain and Italy tax savings interest?
They differ from Germany. In Spain, interest is taxed in the savings base of the IRPF at progressive rates of 19 % up to €6,000, 21 % from €6,000 to €50,000, 23 % from €50,000 to €200,000, 27 % from €200,000 to €300,000 and 28 % above that, with a 19 % withholding by Spanish banks and no German-style allowance. In Italy, interest is taxed at a flat 26 % substitute tax, plus a 0.2 % annual stamp duty on the account balance.