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Do I pay tax on interest from savings?

 

There are a few things that will determine whether you have to pay interest on savings or not

Your allowance for earning Tax Free interest will depend on:

1. Personal Allowance

If you have not used up all your Personal Allowance in our wages, pension or other income you can use that up first.

 

 2. Starting Rate for savings

The starting rate for Tax Free interest is £5000 therefore you can get up to this amount Tax Free. However, the more your earn from other income, the less your starting rate for savings will be. 

You will not be eligible for the starting rate savings if your other income is over £16500

If your other income is less than £16500 your savings rate will go down by £1 for every £1 of any income earned over the personal allowance

 

3. Personal Savings Allowance 

You may also get up to £1,000 of interest tax-free depending on which Income Tax Band you’re in. This is your Personal Savings Allowance.

 

Income Tax band Tax-free savings income
Basic rate £1,000
Higher rate £500
Additional rate £0

 

 

If you have already paid Tax on your Savings income or think you have over paid, you can complete and download Form R40 from SimpleTax and send it to HMRC. It normally takes 6 weeks to get the tax back.

  

Other Keywords: investment; fund; receivable; holdings

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