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Personal Savings Allowance

Since 6 April 2016 banks do not deduct tax from the savings returns you earn. Instead, you have a Personal Savings Allowance (PSA). ISA savings do not form part of your PSA and remain tax-free.

Personal Savings Allowance

The profit earned on a savings account is classed as income. Savers currently pay tax on this income, based on their income tax bracket. Under the new allowance, however, basic rate taxpayers (20%) will be able to earn £1,000 in savings income tax free, whilst higher rate tax payers (40%) will receive a £500 allowance. Additional rate (45%) taxpayers will not receive any allowance.

Tax rate Income band (adjusted net income) Personal Savings Allowance
Basic 20% Up to £43,000 Up to £1,000 in savings income is tax-free
Higher 40% £43,001 - £150,000 Up to £500 in savings income is tax-free
Additional 45% Over £150,000 No Personal Savings Allowance

Frequently asked questions about your Personal Savings Allowance

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