The Personal Savings Allowance
Find out how the Personal Savings Allowance affects the way you receive interest on your savings.
How Interest is paid on your savings
All savings accounts (from every bank and building society) pay gross interest.
This means that no tax will be deducted from any interest you earn. ISA accounts pay interest tax free.
This applies to interest paid from all banks and building societies, credit unions, NS&I as well as some investments and government or company bonds.
Personal Savings Allowance Explained
If you are a basic rate tax payer you can earn up to £1,000 of interest without having to pay any tax. If you’re a higher rate tax payer, you can earn up to £500 without having to pay any tax. Additional rate tax payers won’t receive any allowance at all.
Please note, HMRC anticipate that around 95% of taxpayers will not have any tax to pay on their savings income.
How does the Personal Savings Allowance work?
The example below shows how the Personal Savings Allowance could affect you (based on £1,200 gross annual interest earned).
Basic rate tax payer (20%)Before 6 April 2016
You would have kept £960 of your interest
You keep £1,160 of interest earned
Higher rate tax payer (40%)Before 6 April 2016
You would have kept £720 of your interest
You keep £920 of interest earned
Please note these are only examples and you should refer to HMRC if you are unsure of your personal tax position. You can visit the HMRC website to find out more.
What it means for you
The table below gives you some more detail on how the Personal Savings Allowance affects you, depending on your tax bracket:
|Zero tax rate (your taxable income less than £17,500)||Basic tax rate (20%)||Higher tax rate (40%)||Additional tax rate (45%)|
|Personal Savings Allowance||N/A - you don’t pay any tax on your savings income.||£1,000||£500||N/A - you will pay tax on all of your savings income except income from ISAs|
Frequently Asked Questions
What about any tax due on interest above my allowance?
If the interest you earn in a year is more than your Personal Savings Allowance on all non-ISA accounts you need to pay tax owed to the HMRC. You can get information on how to pay any tax due directly from HMRC - you can visit the HMRC website or call 0300 200 3300 for more information. It is your responsibility to pay this tax.
Whether you need to pay tax is dependent on your own personal circumstances and maybe subject to change in the future.
How does the Personal Savings Allowance affect ISAs?
ISAs are tax free savings accounts, so the interest earned in an ISA doesn't count towards your Personal Savings Allowance.
If you’re still not sure how the Personal Savings Allowance will affect you and any savings accounts you have, you can come into a branch for a savings review. This will ensure that you have the right account for whatever you’re saving for.Find a branch
Be one of the first to learn about our new savings accounts
By signing up to our Savings news email, you'll be one of the first to hear about new savings accounts. Share your email address to receive email communications from us with details of our new savings accounts.Sign up for our Savings news