In 2018-19 (as with 2017-18), the first £1,000 of interest you receive from savings is tax-free if you are a basic-rate taxpayer. If you are a higher-rate taxpayer, the threshold is £500. This is called the Personal Savings Allowance.
- most people will no longer pay tax on savings interest
- banks and building societies have stopped deducting tax from your account interest
Only when your savings income exceeds the allowance is any tax due on it. This will no longer be deducted at source – if tax is due, you can pay it via self-assessment or have it deducted via PAYE through an adjustment in your tax code.
There’s no savings allowance if you’re an additional-rate (45 per cent) taxpayer, as outlined in the following table which shows that the amount of your Personal Savings Allowance depends on your adjusted net income:
Tax rate Income band (adjusted net income) Personal Savings Allowance
Basic 20% Up to £43,500 Up to £1,000 in savings income is tax-free
Higher 40% £43,501 – £150,000 Up to £500 in savings income is tax-free
Additional 45% Over £150,000 No Personal Savings Allowance
Source: HM Revenue & Customs
For more information on this topic or to discuss how we can help you effectively structure your finances for tax and save you money, contact your usual Beavis Morgan Partner.