What are the Personal Savings Allowance and Dividend Allowance?

Triodos Bank does not provide financial advice to savers and investors. We recommend that you seek the help of an Independent Financial Adviser. The following is general information about the changes, which came into effect from 6 April 2016.

Currently, basic rate taxpayers can receive up to £1,000 of savings income, and higher rate taxpayers can receive up to £500 of savings income, without any tax being due. The Personal Savings Allowance (PSA) is not available to any savers with additional rate income.

Cash ISA

If interest rates were to rise then the level of savings you can have before having to pay tax on the interest could drop considerably, which is not an issue when saving in an ISA. For example, at 5% AER a basic rate taxpayer would only need £20,000 in non-ISA savings before they’d reach the £1,000 basic rate taxpayer allowance. This amount would drop to £10,000 for a higher rate taxpayer with an allowance of £500. Additional rate taxpayers are not eligible for a PSA but can still benefit from saving tax free in an ISA. If your income changes, your tax rate may change and so this may lead to a change in your PSA.

Any interest earned on ISAs does not count towards your PSA. If you earn interest in non-ISA savings above your PSA, you’d have to pay tax on this.

Stocks and Shares ISA

Prior to April 2016, dividends in a stocks and shares ISA were paid with 10% tax already taken off, which couldn’t be reclaimed, but following the introduction of the Dividend Allowance, dividends from a stocks and shares ISA no longer have any tax taken off. They are completely tax free regardless of their value, whereas dividends paid from non-ISA investments are taxable over £500 for the 2024/25 tax year. There remains no Capital Gains Tax liability from a stocks and shares ISA.

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Related how-to guides

How to transfer an ISA to a Triodos cash ISA

Change the type of cash ISA held with Triodos Bank

How to transfer an existing ISA to a Triodos Stocks & Shares ISA

How to update your account and personal details

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