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What is the Personal Savings Allowance?

From 6 April 2016, basic rate and higher rate taxpayers will be entitled to a savings income (interest paid) tax-free allowance called the Personal Savings Allowance. Basic rate taxpayers can earn up to £1,000 in savings income tax free per tax year, and higher rate taxpayers can earn up to £500 in savings income tax free per tax year.

This allowance applies to all individuals, sole traders, general partners (partnerships) and trustees (trusts).

With effect from 6 April 2016 we will pay credit interest on accounts without tax taken off and you’ll no longer need to tell us if you qualify for tax-free interest.

Even if interest was accrued in the tax year prior to 6 April 2016, if it is paid to you from 6 April 2016 onwards, it will be paid without tax taken off.

You will be able to find details of the interest we have paid to you on your statements, which you can use to work out if your savings income is within your Personal Savings Allowance. Interest you receive from any Individual Savings Account (ISA) won’t count towards your Personal Savings Allowance because it’s already tax free.

Details of the types of interest income that count towards your Personal Savings Allowance and what to do if your savings income exceeds your allowance can be found by visiting www.gov.uk/hmrc/savingsallowance or contacting HMRC or your accountant.

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