Banks and building societies will no longer deduct tax from the interest they pay you.
What counts as savings income?Savings income includes account interest from:
- bank and building society accounts
- accounts with providers like credit unions or National Savings and Investments
- interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts
- income from government or company bonds
- most types of purchased life annuity payments
If your taxable income is less than £17,000If your total taxable income is less than £17,000 you won’t pay tax on any savings income.
How much your Personal Savings Allowance will beThe amount of your Personal Savings Allowance depends on your adjusted net income.
The table shows your allowance from 6 April 2016, depending on whether you’re a basic, higher or additional rate taxpayer.
|Tax rate||Income band (adjusted net income)||Personal Savings Allowance|
|Basic 20%||Up to £43,000||Up to £1,000 in savings income is tax-free|
|Higher 40%||£43,001 - £150,000||Up to £500 in savings income is tax-free|
|Additional 45%||Over £150,000||No Personal Savings Allowance|