The short version: The Personal Savings Allowance is how much interest you can earn from savings before paying tax on it. The amount depends on which tax band you’re in.
How much do you get?
Basic rate taxpayers get a larger allowance than higher rate taxpayers. Additional rate taxpayers don’t get a Personal Savings Allowance at all. Check gov.uk for current figures.
What counts as savings interest?
Interest from bank and building society accounts, interest from peer to peer lending, interest distributions from authorised unit trusts. It doesn’t include dividends or interest within ISAs (which is already tax free).
Do you need to do anything?
Banks now pay interest gross (without deducting tax). If your interest is below your allowance, there’s nothing to do. If it’s above, you might need to declare it through Self Assessment, or HMRC will adjust your tax code to collect what’s owed.
What about ISAs?
Interest in ISAs doesn’t count towards your Personal Savings Allowance because ISA interest is tax free anyway.
Earning more interest than expected? Let’s check if there’s tax to pay.
