Tax on savings interest
Make the most of your interest and understand how tax works.
Interest from cash ISAs
Cash ISAs are tax-free. So you don't need to pay any tax on the interest earned. Bear in mind you can only save in one cash ISA in a tax year and there are limits on how much you can save.
Interest from other savings accounts
Most people don’t need to pay tax on their interest from non-ISA savings accounts. This is because of the Personal Savings Allowance.
The Personal Savings Allowance
The PSA is an allowance for how much interest you can earn from non-ISA savings accounts before you have to pay any tax on it. Whether you get a PSA depends on your tax status.
- Basic rate taxpayers can earn up to £1,000 of interest tax-free each tax year.
- If you're a higher rate taxpayer you get a £500 allowance.
- Additional rate taxpayers don't get a PSA.
There are other allowances that may affect how much tax you need to pay. You can find out more on the Government website.