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Personal Savings Allowance

Overview

Since 6 April 2016 basic rate tax (20%) is no longer deducted from savings interest as most UK taxpayers will have a Personal Savings Allowance (PSA). From this date:

basic rate taxpayers can earn up to £1,000 income from savings (e.g. credit interest) tax-free
higher rate tax payers can earn up to £500 savings income tax-free
additional rate taxpayers don't get a PSA.

You don't need to do anything different. If your savings income is less than your PSA you won't pay any tax on it. If your savings income is more than your PSA, where possible HM Revenue & Customs (HMRC) will collect any tax automatically via your tax code, based on information from banks and building societies. If you currently complete a self assessment tax return, just continue doing this as normal.

You can find more information about these changes on the HMRC website Opens an overlay [Will show a security message first] but if you need help or advice we recommend you speak to an accountant or tax advisor.

Personal Savings Allowance (PSA) frequently asked questions

What is savings income?

Savings income includes:

interest from banks, building societies and other account providers e.g. credit unions, NS&I etc
interest from unit trusts, not including dividends
open-ended investments and investment trusts
income from government or company bonds
certain types of life annuity payments or life insurance contracts.

Does income from my Individual Savings Account (ISA) count towards my PSA?

Will the way credit is paid on my accounts change?

If you have an account that pays interest annually e.g. our Regular Saver or Fixed Rate Savings and it matures before 6 April 2016, your interest will be paid net ie with basic rate tax deducted, unless you've registered for gross interest by completing either a R85 or R105 form. If your account matures on or after 6 April 2016, your interest will automatically be paid gross.

If you have an account that pays interest monthly e.g. our Savings Account, interest payments made before 6 April 2016 will be paid net unless you've registered for gross interest by completing either a R85 or R105 form. Interest payments made on or after 6 April 2016 will automatically be paid gross.

Will the changes affect savings income I received before 6 April 2016?

Do I need to tell you about other savings income or my tax rate?

I've registered to receive gross interest (without tax taken off), what do I need to do now?

What about interest paid on compensation payments?

Banks and building societies will still have to deduct tax from any compensation interest paid after 6 April 2016. You may be able to claim the tax back by completing a Form R40 (or Form R43 if you're living overseas) and sending it to HMRC - you can get these forms by visiting www.gov.uk Opens an overlay [Will show a security message first].

How do I claim back tax paid on other savings income?

From 6 April 2016, banks and building societies will pay credit interest gross i.e. with no tax taken off but you may still receive other types of savings income net.

You may be able to claim this tax back by completing a Form R40 (or Form R43 if you're living overseas) and sending it to HMRC - you can get these forms by visiting www.gov.uk Opens an overlay [Will show a security message first].