Do I have to pay tax on my savings?

As a source of income, you might need to pay tax on interest you earn from your savings. However, there are tax-free allowances you can take advantage of.

What counts as savings income?

You might need to declare and pay tax on:

  • Interest earned on non-ISA savings accounts and current accounts
  • Income from corporate bonds and government bonds
  • Interest distributions from authorised unit trusts, open ended investment companies and investment trusts.

ISAs are usually tax free, although savings are capped by your ISA allowance

Your personal savings allowance

If you’re a UK taxpayer, you could benefit from a tax-free personal savings allowance (PSA). Your PSA depends on your income and tax bracket:

  • Basic-rate taxpayers (20%) – up to £1,000 of earned savings interest is tax free. 
  • Higher-rate taxpayers (40%) – up to £500 of earned savings interest is tax free.
  • Additional-rate taxpayers (45%+) – no tax-free savings allowance.

More on your PSA

The starting rate for savings

If you earn less than £17,570 a year, you could also benefit from the starting rate for savings. That could amount to as much as £5,000 in tax-free interest, in addition to your personal savings allowance.

Visit HM Revenue & Customs

Tax-efficient savings

In addition to a personal savings allowance, if you’re a UK taxpayer, you could take advantage of an ISA allowance. In the current tax year, this can be used to save and earn tax-free interest on up to £20,000.

There are several ISA types available. At Halifax, we offer both cash ISAs and stocks and shares ISAs.

See available ISAs 

Declaring and paying tax

It’s your responsibility to report and pay tax on any interest earned over and above your allowances.

If you complete a self-assessment tax return, make sure you include all forms of income when calculating any tax owed. That includes any savings interest you’ve earned

Banks and other financial providers are not always required to deduct tax from any interest you earn. What they will do though, is report any interest earned to HM Revenue & Customs (HMRC) at the end of each tax year. HMRC might use this information to change your tax code to collect any tax due throughout the year. They may adjust your tax code even if you complete a self assessment return.

Looking for more help?

To find out more about your savings options, why not book a free personal review with Halifax?

Plenty to choose from

Whether you need easy access to your money or can fix for a longer term to earn more interest. 

Watch your savings grow

It’s easy to keep track of your savings using Online Banking or the Mobile Banking app. 

Start saving today

Open an ISA online today. On selected accounts, start saving with as little as £1.

Halifax Savers Prize Draw

Every month, eligible Halifax savers have the chance to win prizes of up to £100,000. Registration and prize draw rules apply.

Find out how to register

Financial Services Compensation Scheme

Eligible deposits held with us are protected up to a total of £85,000 by the Financial Services Compensation Scheme (FSCS), the UK’s deposit guarantee scheme.

FSCS logo 

Visit our FSCS page