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A personal savings allowance (PSA) allows people who pay basic and higher rate of income tax to have an amount of savings interest that can be kept tax-free.
How does the personal savings allowance work?
The personal savings allowance available to you is dependent on how much you earn:
The interest you earn on your savings will be paid gross, meaning we will not automatically deduct tax from your interest. It is your responsibility to pay any tax you may owe to HM Revenue and Customs (HMRC).
What income is covered by the personal savings allowance?
The personal savings allowance applies to savings income which includes:
Savings income from Individual Savings Accounts (ISAs) does not count towards the personal savings allowance as it is already tax-free.
To find out more about the personal savings allowance, please visit the HMRC website.
Do I still need a cash ISA account?
Understanding whether an ISA account is a suitable option for you depends on a number of factors, such as your income, which taxpayer band you fall into and the amount you are likely to save.
There are several reasons why an ISA might be worth considering: