Diploma for Financial Advisers
Diploma in Accounting
Member of London Institute of Banking and Finance

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You might need to pay tax on the interest you earn from your savings. However, many people don’t pay tax on their savings interest because of the Personal Savings Allowance (PSA). Here’s a quick rundown:

Personal Savings Allowance (PSA):

Basic-rate taxpayers (earn up to £50,270 a year) can earn up to £1,000

 in savings interest tax-free.
Higher-rate taxpayers (earn between £50,271 and £125,140 a year) can earn up to £500 in savings interest tax-free.
Additional-rate taxpayers (earn over £125,140 a year) don’t get a PSA.

Individual Savings Accounts (ISAs):

Any interest earned in an ISA is tax-free, no matter how much you earn.

Tax Deduction at Source:

Banks and building societies do not deduct tax from your savings interest. If you owe tax, you must declare it on your self-assessment tax return.

In short, whether you pay tax on your savings depends on how much interest you earn and your total income. Many savers don’t pay any tax on their interest due to the PSA and ISAs.

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