Do I pay tax on my savings?

Why is this important?  

To make the most of your savings you need to manage your money efficiently. Understanding how savings can be taxed will help you choose a savings account that suits you.  

Do I pay taxes on my savings accounts?  

Every tax year, you receive a Personal Savings Allowance (PSA). This is how much you can earn in interest on your savings before you pay tax on the interest you earn.  

The amount of allowance is dependent upon your taxpayer type.  

• additional rate taxpayers (45%) do not receive an allowance  
• higher rate taxpayers (40%) can earn an annual tax-free interest of £500  
• basic rate taxpayers (20%) can earn £1,000 an annual tax-free interest of £1000  

If you don’t pay any tax at all, you might be able to earn as much as £18,570 in savings interest before you pay any tax.  

Do I pay tax on my Individual Savings Account (ISA)?  

You do not pay tax:  

• on the interest on cash in your ISA up to £20,000 
• on the capital or income gains from investments in an ISA  

How is the tax paid?  

If you earn interest over your allowance, HMRC will change your tax code, so you pay the tax automatically. Usually, this is an estimate based on the previous year.  

If you complete a Self-Assessment tax return, you must report any interest earned on your savings in this form.  

The information in this guide was accurate when published.