Most people can earn some interest on their savings without paying any tax. Allowances include things such as the Personal Savings Allowance.
Starting rate for savings
You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings.
The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.
If your other income is £17,570 or more
You’re not eligible for the starting rate for savings if your other income is £17,570 or more.
If your other income is less than £17,570
Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.
Personal Savings Allowance
Depending on which income tax band you’re in, you may receive up to £1,000 in savings interest and not need to pay any tax on it. This is called the Personal Savings Allowance.
| Income Tax Band | Personal Savings Allowane |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
Interest covered by your allowance
Your allowance applies to interest from:
- bank and building society accounts
- savings and credit union accounts
- unit trusts, investment trusts and open-ended investment companies
- peer-to-peer lending
- trust funds
- payment protection insurance (PPI)
- government or company bonds
- life annuity payments
- some life insurance contracts
Savings in tax-free accounts (such as ISAs and some National Savings and Investments accounts) do not count towards the allowance.
Interest on joint accounts
Interest would be split equally between the account holders.