Tax Advice: Maximise your personal savings allowance

20 Jun 2018

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.

This means:

  • 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 Paul Attridge or your usual Beavis Morgan Partner.

Further reading:

Tax Advice: OTS Report – Savings income: routes to simplification
Tax Advice: Capital gains tax (CGT) allowance