What is the Personal Savings Allowance?

And what does it mean for your savings?

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The Personal Savings Allowance (PSA), introduced on 6 April 2016, allows most UK savers to earn tax-free interest on their savings up to certain limits each tax year (6 April to 5 April).

What is my Personal Savings Allowance?

The amount you can earn in interest each year with the Personal Savings Allowance varies depending on your Income Tax band:

Income tax band (England and Wales) Income tax rate
Personal Savings Allowance
Basic rate 20% £1,000
Higher rate 40% £500
Additional rate 45% £0

Scottish savers: this works differently for you

What counts towards your Personal Savings Allowance?

The interest you earn on savings held in Individual Savings Accounts (ISAs) is free from tax and doesn’t count towards your Personal Savings Allowance.* Most other savings income, including interest on a savings account or current account, counts towards your Personal Savings Allowance. 

*Tax-free is the rate payable where interest is exempt from UK income tax. Your savings balance will be eligible for this tax benefit for so long as it is held in a valid cash ISA account.

The tax treatment of ISAs and the applicable Government rules are subject to change. The benefits of your account for tax purposes will depend on your personal financial circumstances.

The content in this article is for information only and is not advice. All content in this article was accurate on the date of publication shown above.