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Personal Savings Allowance

What's a personal savings allowance?

Put simply, it’s the maximum savings income you can earn tax-free on your savings, each tax year (not including accounts where interest isn’t taxed, like ISAs).

How much is my Personal Savings Allowance?

This will depend on what rate of income tax you pay. Currently, each tax year it's:

  • basic rate (20%) taxpayers can earn up to £1,000 interest tax-free
  • higher rate (40%) taxpayers can earn up to £500 interest tax-free
  • additional rate (45%) taxpayers don’t have a Personal Savings Allowance.

What is savings income? 

It’s any amount of money you earn from your savings and includes:

  • interest from bank and building societies
  • interest from other account providers, such as credit unions
  • interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts
  • interest from government or company bonds
  • interest from life annuity payments
  • interest from life insurance contracts.

Is Cash ISA interest included in my Personal Savings Allowance? 

The great thing about Individual Savings Accounts (ISAs) is that you can save tax-free each year, in the current tax year you can save up to £20,000. This means any interest you make in a Cash ISA is already tax-free within that tax year, so it won’t count towards your Personal Savings Allowance.

What happens if my savings income is more than my allowance?

If this happens, HMRC (HM Revenue & Customs) will collect any tax you owe via a change to your tax code (based on information from banks, building societies etc) or via your self-assessment tax return, if you complete one.

What happens if I think I’ve paid too much tax on my savings income?

If this happens, you may be able to claim it back from HMRC (HM Revenue & Customs) for up to 4 years, by filling in an R40 form (R43 if you live outside the UK). You can find the forms at gov.uk.

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

No, you don't need to give us information about your tax rate or other savings income.

What next? 

Now you know the basics, you might be wondering how to make the most of your Personal Savings Allowance.

Well, if you’re already saving and your interest is less than your Personal Savings Allowance, then you won’t pay any tax on it. But if it’s more, it might be worth looking into an ISA, if you don’t already have one.

If you’re not currently saving, we have lots of savings accounts to choose from and our savings comparison page can help you pick one that’s right for you.

If you need more help understanding your Personal Savings Allowance you can take a look at HMRC's factsheet or speak to an independent tax advisor.