What is the Personal Savings Allowance?

And what does it mean for your savings?

24 February 2025

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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.

Why save in an ISA?

Saving in an ISA remains a great way to save. While your Personal Savings Allowance can allow you to earn interest each year up to a certain limit tax-free*, all interest earned on savings held in an ISA is tax-free for as long as you keep them there – and you can grow your tax-free* savings pot year after year.

Read more about our Cash ISA

Personal Savings Allowance for a joint account

When it comes to the Personal Savings Allowance for a joint account, interest is split equally between the account holders. So, what are the tax implications of joint accounts?

Suppose one of you is a basic rate taxpayer, and your partner pays at a higher rate. In that case, half the interest will count towards your basic rate Personal Savings Allowance (£1,000), and half towards your partner’s higher rate Personal Savings Allowance of £500.

Can interest earned from saving change my tax band?

Interest on your bank or building society savings is classed as income for UK income tax purposes – which means the amount you earn can affect your Income Tax band. For example, if you’re usually a basic rate taxpayer and you earn £1,000 in interest from your savings during one tax year, that could push you into the higher-rate tax band, meaning that your £1,000 Personal Savings Allowance reduces to £500.

*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.