Worried about paying your mortgage? We have various ways that we can help you.
Depending on your income tax band, you could earn up to £1,000 in tax-free interest each year using your personal savings allowance (PSA).
Set by the government, your personal savings allowance is the amount of interest you can earn on your savings before tax applies.
Your PSA is dependent on your annual income, which can include earnings from work, benefits and pensions, investments and savings.
Higher rate taxpayers may have a smaller allowance, or no personal savings allowance at all, meaning tax will apply to more of their savings income.
It is a legal requirement to pay tax on any interest earned over and above your personal savings allowance.
Watch a short video about your personal savings allowance:
The amount of interest you can earn on your savings will depend on your tax bracket:
If your income is below £17,570, you may benefit from the starting rate for savings. For the current tax year, that’s up to £5,000 in tax free interest.
If you earn between £12,571 and £17,570, you may qualify for both the starting rate for savings, in addition to your personal savings allowance.
Your PSA covers a range of saving types, including:
Whether or not you benefit from a PSA, you may be interested in saving products which help you to earn tax-free interest as standard. Separate to your PSA, is your ISA allowance – in the current tax year, this allows you to save and earn tax free interest on up to £20,000.
Banks and other financial institutions report all interest to HM Revenue & Customs (HMRC) at the end of each tax year. If you’re employed, or you receive a pension, HMRC may simply change your tax code, so interest is taxed automatically.
If you complete a Self-Assessment Tax Return, you should report all earnings, including any interest earned on savings, before calculating and paying any tax due.
If you think you’ve overpaid, you can reclaim tax on your self-assessment, or by completing an R40 form – available from the gov.uk website.
Any interest you earn over and above your personal savings allowance should be declared for tax purposes.
If you think you may use up your personal savings allowance, or want an alternative way to save tax free, then you may be interested in an ISA.
Lloyds Bank offers different types of ISAs to suit different savings goals, including:
An ISA could help:
The ISA you choose may depend on your saving goals, how long you can afford to tie your money down, and the amount of risk you’re prepared to accept for higher potential returns.
Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS).