How Much Savings Interest Can You Earn Tax-Free?
Frequently Asked Questions
The PSA lets you earn savings interest tax-free. Basic rate taxpayers get £1,000 PSA; higher rate taxpayers get £500; additional rate taxpayers get £0.
The starting rate band is up to £5,000 of savings income taxed at 0%. However, it is reduced pound-for-pound if your non-savings income (salary, pension) exceeds the personal allowance.
People with low earned income (below about £17,570). If your salary plus pension is below £17,570, you can earn up to £5,000 of savings interest at 0%, in addition to your PSA.
No. Interest in Cash ISAs and Stocks & Shares ISAs is completely exempt from income tax and does not count towards your PSA limit.
It depends on your income. A basic rate taxpayer could earn up to £1,000 (PSA) completely tax-free. Someone with very low non-savings income could earn up to £6,000 (£1,000 PSA + £5,000 starting rate).
If your savings interest exceeds your PSA, you should report it. HMRC may automatically collect tax through a PAYE code adjustment if the amount is below £10,000. Self-employed people should always include it.
Bank/building society interest, NS&I savings income (some products), most interest from peer-to-peer lending, interest from investment bonds (some), and some types of dividend/interest from investment trusts.
Yes, the PSA applies to all savings interest received by UK residents, including interest from overseas accounts. All interest must be declared on self-assessment if it exceeds the PSA.
Basic rate taxpayers pay 20%; higher rate taxpayers pay 40%; additional rate taxpayers pay 45% on savings interest above their PSA.
No. Premium Bond prizes (winnings) from NS&I are entirely tax-free and do not count towards the PSA.
If you're pushed into the higher rate band by fiscal drag, your PSA drops from £1,000 to £500. This is an additional cost of the frozen higher rate threshold.
PSAs are per individual, not joint. A couple each earn their own PSA. Holding savings jointly means each earns 50% of the interest, using 50% of their respective PSAs.