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Savings Taxation
Personal savings allowance: what's happening?
On 6 April 2016, the UK Government introduced a Personal Savings Allowance - how much interest you can earn on your savings without paying tax. If you are a basic rate taxpayer (20%), you can earn up to £1,000 in interest tax-free, and higher rate taxpayers (40%) can earn up to £500 in interest tax-free. Additional rate taxpayers (45%) do not receive a Personal Savings Allowance.
What does this mean for me?
This means we no longer deduct tax from interest you accrue in any of your savings accounts. If your total taxable income is less than £17,000, you won’t pay tax on any savings income.
What do I need to do?
If you are a basic rate taxpayer and have savings income or interest of more than £1,000, you will need to pay any tax you owe directly to HMRC, but you don’t need to do anything yet. If your savings income or interest is less than £1,000, you don’t need to do anything at all.
If you are a higher rate taxpayer and have savings income or interest of more than £500, you will need to pay any tax you owe directly to HMRC, but you don’t need to do anything yet. If your savings income or interest is less than £500, you don’t need to do anything at all.
HMRC will normally collect the tax by changing your tax code, and banks and building societies will pass on the relevant information they need to do this. If you fill in a self-assessment tax return you should carry on doing this as normal.