From 6 April 2016, if you’re a basic rate taxpayer you’ll be able to earn up to £1,000 in savings income tax-free. Higher rate taxpayers will be able to earn up to £500. This is called the Personal Savings Allowance.
- most people will no longer pay tax on savings interest
- banks and building societies will stop deducting tax from your account interest
- account interest will be paid gross
If you already receive interest without tax being taken off, you’ll no longer need to tell the bank that you qualify for tax-free interest.
Personal Savings Allowance
The amount of your Personal Savings Allowance depends on your
adjusted net income.
The table shows your allowance from 6 April 2016, depending on whether you’re a basic, higher or additional rate taxpayer.
||Up to £43,000
||Up to £1,000 in savings income is tax-free|
||£43,001 - £150,000
||Up to £500 in savings income is tax-free|
||No Personal Savings Allowance
If your total taxable income - for example, from wages, profits, pensions and savings - is less than £17,000, then you won’t pay any tax on your savings income.
What you need to do
You don’t need to do anything to claim your Personal Savings Allowance.
If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.
HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.
If you fill in a Self Assessment tax return you should carry on doing this as normal.
If you have any queries please contact your local branch or refer to HMRC.
HMRC - A guide to the Personal Savings Allowance