Good news! For most people, the allowance is processed automatically with any tax owing paid through changes to your tax code. However, if your interest earnings exceed your PSA, you must declare this to HMRC.
Understanding Personal Savings Allowance
What is my Personal Savings Allowance?
The Personal Savings Allowance (PSA) is a UK tax benefit designed to reduce the amount of tax you pay on your savings interest.
What counts towards my Personal Savings Allowance?
The interest you earn each tax year on your savings with Danske Bank, combined with any interest earned on other bank and building society accounts, credit union accounts, investment savings etc.
This isn’t an exhaustive list. You can check all inclusions and exclusions at GOV.uk.
Understanding tax-free interest allowances
The amount of interest you can earn tax-free each year depends on your income tax bracket:
- Basic rate taxpayers (20%) can earn up to £1,000 in tax-free interest annually.
- Higher rate taxpayers (40%) are eligible for up to £500 in tax-free interest per year.
- Additional rate taxpayers (45%) don’t qualify for this allowance. For accurate taxpayer thresholds, visit GOV.uk.
“The amount of interest you can earn tax-free each year depends on your income tax bracket”
FAQs
For more information on saving in a Cash ISA, refer to our article below:
ABCs of ISAs
