Your Personal Savings Allowance will depend on what rate of income tax you pay. For example, basic rate taxpayers have a PSA of £1,000.
Basic-rate (20%) taxpayers can earn £1,000 in savings interest per year with no tax. You’re in the basic rate band if your taxable income is £12,571 to £50,270.
Higher-rate (40%) taxpayers can earn £500 in savings interest per year with no tax. You’re in the higher band if your taxable income is £50,271 to £125,140.
Additional-rate (45%) taxpayers do not get a Personal savings Allowance. You’re in the additional rate band if your taxable income over £125,140.
Remember that tax rules can change, and the value of any tax benefits will depend on your circumstances.
Savings income is the amount of money you earn from your savings. This includes:
There are different rules for tax on foreign savings and children’s savings accounts.
Individual Savings Accounts (ISAs) and some National Savings and Investments (NS&I) products are excluded from the Personal Savings Allowance. This is because the interest they earn is already tax-free.
If your savings interest exceeds your Personal Savings Allowance, HMRC will collect any tax you owe on your savings accounts. This is usually done through a change to your tax code (based on information provided by banks and building societies), or through your annual self-assessment tax return if you complete one.
If you’ve paid too much tax, you may be able to claim this back.
You’ll need to fill in form R40 (or form R43 if living outside the UK) and send it to HMRC. These forms are available online at GOV.UK. You can claim back overpaid tax on your savings from up to 4 years prior.
Only individuals get a Personal Savings Allowance. If your accounts relate to a business, charity, club or association, they'll earn interest without tax deducted.
If you’re a trustee or are administering an estate, HSBC won’t deduct the tax from the credit interest paid. Any tax due needs to be paid through the trust/estate tax return.
If you need more guidance on your Personal Savings Allowance, visit GOV.UK: Tax on savings interest or speak to a tax adviser.
This article was last updated: 08/10/2024, 09:08
