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 6 April 2016 the way customers pay income tax on the interest earned on their accounts has changed. The Government has changed the regulations, so that from 6 April 2016, we 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 are responsible for making sure you're paying the correct tax. From 6 April 2016, all banks and building societies are no longer required to deduct 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 has had the interest paid gross (without tax taken off) and you are 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.
No. You can still save up to your annual ISA subscription limit per tax year. Your Personal Savings Allowance covers the interest you earn on all your non-ISA accounts with all banks and building societies as this is already tax free.