Personal Savings Allowance

Last updated: 17th September 2020

What is the Personal Savings Allowance?

The Personal Savings Allowance means most UK adults can earn up to a certain amount in savings interest without paying tax. As part of this, banks and building societies don’t automatically deduct tax on interest earned on savings.

For more detailed information go to the HMRC website.

How much is my Personal Savings Allowance?

Your Personal Savings Allowance depends on what rate of tax you pay:

  • If you’re a basic-rate taxpayer (20%), you can earn £1,000 of interest a year without paying tax.
  • If you’re a higher-rate taxpayer (40%), you can earn £500 of interest a year without paying tax.
  • If you’re an additional-rate (45%) taxpayer, you won’t receive a Personal Savings Allowance.

You’ll need to pay tax on any interest you earn above the amount of your Personal Savings Allowance.

What counts towards my Personal Savings Allowance?

Any interest earned on your savings and current accounts will contribute to your Personal Savings Allowance. So if you’ve got a savings account with us, for example, the interest you earn will count towards your allowance.

This doesn’t include ISAs though – the interest on ISAs is already paid tax-free, so it won’t count towards your Personal Savings Allowance.

If you have a joint account, both account holders will receive a Personal Savings Allowance, which will be used against each account holder’s share of the interest.

Only individuals receive a Personal Savings Allowance. If you’re a business, charity club or association you’ll already receive interest without tax taken off.

How do I find out how much interest I’ve earned?

Get in touch with your bank or building society if you’d like to know how much interest you’ve earned on your savings. If you’ve got a savings account with us, you can request a Statement of Interest. Give our Savings team a call on 03450 50 50 75.

What do I need to do if I think I need to pay tax on my interest?

If you have any savings income over your Personal Savings Allowance, you’ll have to pay tax on this. HMRC will normally collect the tax by changing your tax code.

If you complete a self-assessment tax return, you should include any income from savings on your return.

 

This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions, we recommend that you seek legal and/or financial advice if you have any questions or queries.