Your Personal Savings Allowance is how much interest you can earn without paying tax. If you're a basic rate tax-payer, your Personal Savings Allowance is £1,000. If you're a higher rate tax-payer, it's £500. If you earn £150,000 or more, you won't have a Personal Savings Allowance.
HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this. If you fill in a Self-Assessment tax return you should carry on doing this as normal.
From 6th April 2016 the way customers pay income tax on the interest earned on their accounts is changing. For most customers who had not completed an R85 form, we used to deduct income tax from their interest at the basic rate of tax before crediting the interest to their account. The Government are changing the regulations, so that from 6th April 2016, we will no longer deduct tax from the interest earned on their account. Depending on your circumstances, you may still be liable to pay income tax on your interest. For more information or guidance on whether you are liable to pay tax on the interest earned on your account you can contact HMRC directly. Learn more
You only need to pay tax on any interest you earn above your Personal Savings Allowance. You'll be responsible for making sure you're paying the correct tax. From 6 April 2016, all banks and building societies will stop deducting tax from interest earned on non-ISA savings and current accounts. If you owe any tax on your interest, you'll pay it directly to HMRC. If you are unsure if you are required to pay tax, please contact HMRC on their website.
Yes. It affects everyone with a non-ISA savings or current account that pays credit interest. From 6 April 2016, everyone with non-ISA savings or current accounts in the UK will have the interest paid gross (without tax taken off) and you'll be responsible for paying any tax you owe on the interest. Everyone who earns less than £150,000 will either pay no tax on their savings interest or only pay tax on the amount of interest above their Personal Savings Allowance.