Personal Savings Allowance: What Is It?
The personal savings allowance is the interest-earning on your savings in a tax year. It usually lies between the 6th and 5th of April before you start paying taxes. However, different personal savings allowance stages depend on your income and the tax you pay.
Personal Saving Allowance- How Much is It?
The amount of your personal savings allowance depends on what sort of taxpayer you are. Below is the table showcasing the interest you earn in an accounting year. You can work out your tax band by adding the total amount of interest you earn to your other income for the year. However, the tax bands and thresholds may differ for every Scottish individual.
Here’s a quick overview of what we’ll cover in this article:
- Example of Personal Saving Allowance
- Types of Interest Covered by the Personal Savings
Allowance - How To Claim Personal Savings Allowance?
- What If My Interest Exceeds the Allowance?
| Taxpayer Type (2024/25) |
Tax band thresholds (2024/25) | Personal Saving Allowance |
| Basic Rate (20%) | £12,571 – £50,270 | £1000 |
| High Rate Taxpayers (40%) | £50,271 – £125,140 | £500 |
| Additional Rate Income Taxpayer (45%) | £125,140 upwards | No available allowance |
Example of Personal Saving Allowance
Suppose you earn £25000 in a year and get £600 interest on the money in a savings account. This showcases that you earned £25600, which means you are a basic rate taxpayer. You can also receive a £1000 personal savings allowance, so you don’t have to pay tax on your savings interest.
If you earned £1500 in account interest, you wouldn’t need to pay tax on the first £1000, but you will need to pay a basic rate tax of 20% on the remaining £500.
Types of Interest Covered by the Personal Savings Allowance
The Personal Savings Allowance covers most types of interests like bank accounts, trust funds, government bonds and life annuity payments.
There are a few exceptions, like ISAs and national savings and investments, such as premium bonds that are already tax-free, so they are not covered by Personal Savings Allowance.
How To Claim Personal Savings Allowance?
Now, you do not need to do anything to claim Personal Savings Allowance, meaning it happens automatically.
What If My Interest Exceeds the Allowance?
If the interest you earn on savings exceeds the Personal Savings Allowance, you must pay tax on the specific difference. If you pay tax through Paye or work for an employer or your pension, then by working for an employer and paying tax through PAYE or getting pension, HMRC will update your tax code, and they will collect the tax you owe.
If you submit your Self-assessment tax returns, you can report the savings interest you earn and pay tax on the amount. Ensure that the interest you earn on savings counts towards your whole income, determining your tax band.