Personal Savings Allowance

Tax-free savings changed from 6th April 2016, with the introduction of the new Personal Savings Allowance. This is the amount you are able to save tax free and will depend on your total taxable income.

In a radical reform to the savings tax system, HM Revenue and Customs (HMRC) are creating a new Personal Savings Allowance (PSA) which became effective from 6th April 2016, exempting the first £1,000 of savings income from any tax for basic rate taxpayers and the first £500 for higher rate taxpayers, saving up to £200 off an annual tax bill. (This will not apply to additional rate taxpayers).

You will only pay tax on the interest earned above your Personal Savings Allowance.

For more information on the Personal Savings Allowance please click here to see our FAQs click here

What does this mean to me?

The changes mean that interest will be paid gross and tax won’t be deducted.

You don’t need to do anything following 6th April 2016, the changes will happen automatically.

What do I need to do if I exceed my PSA?

If you do earn over your Personal Savings Allowance, you’ll need to pay this directly to HMRC.

If you don’t make Self Assessment tax returns and exceed your Personal Savings Allowance, HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

There is no requirement to complete an R85 or the R105 forms (required for savers who are eligible to be paid interest gross); these will be abolished and interest payments to non UK residents will continue to be made gross.

Further information on these changes is available from HMRC by visiting: www.gov.uk

A guide to the Personal Savings Allowance

HM Revenue & Customs - Guide to the Personal Savings Allowance