With interest rates higher, more people owe tax on their savings. We explain your Personal Savings Allowance, work out any tax due, and make sure it is reported correctly so HMRC does not catch you out.
Tax on Savings Interest
Most people can earn some savings interest tax-free through the Personal Savings Allowance, £1,000 for basic-rate taxpayers, £500 for higher-rate, and nothing for additional-rate. There is also a separate starting rate for savings for those on low incomes. With higher interest rates, many savers now exceed their allowance for the first time and owe tax they may not realise.
Your Tax Help Accountants works out your total interest, applies the right allowances, and calculates any tax due. Where it is not collected automatically through your tax code, we make sure it is reported correctly, and where you are a non-taxpayer we make sure you are not taxed at all. No nasty letters from HMRC.
HMRC usually collects tax on savings interest by adjusting your tax code based on bank data, which can be wrong or a year behind. Checking your actual position avoids both overpaying and an unexpected bill.
The Detail That Matters
Most people can earn a good amount of savings interest tax-free thanks to the Personal Savings Allowance and the starting rate for savings, but with interest rates higher, more savers are now tipping over into a tax bill, often without realising it.
Basic-rate taxpayers can earn £1,000 of savings interest tax-free each year; higher-rate taxpayers get £500; additional-rate taxpayers get nothing. Interest above your allowance is taxed at your marginal rate, usually collected through a change to your tax code.
On top of the allowance, those with low non-savings income can benefit from a £5,000 starting-rate band for savings, taxed at 0%. It reduces as your other income rises above the personal allowance, but for pensioners and low earners it can shelter substantial interest.
Interest inside an ISA is always tax-free and does not use your allowances, so sheltering savings there is the simplest way to avoid a bill. For couples, holding savings in the lower earner's name can use their allowance and starting-rate band.
Banks report interest to HMRC, which usually adjusts your tax code automatically, but the figures can be estimated or out of date, leading to over or undertaxation. We check the position and make sure the right amount, and no more, is collected.
Higher interest rates have quietly pushed many cautious savers over their Personal Savings Allowance for the first time in years, and HMRC's automatic coding of the extra tax is often based on estimates that are simply wrong.
Key Figures
How We Help
We apply your Personal Savings Allowance, £1,000, £500 or nil depending on your tax band, and the starting rate for savings if it helps you.
Where tax is due and not collected through your code, we report it correctly, and where you are a non-taxpayer we make sure you pay nothing.
HMRC adjusts codes from bank data that can be wrong. We check their figures against your actual interest so you neither overpay nor get a surprise bill.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
With rates higher, many savers have crossed their allowance for the first time and either owe tax they do not know about, or are having their code adjusted incorrectly. We work out the real position and keep it right.
Recent Client Outcome
A basic-rate pensioner with a large cash savings pot suddenly received a tax bill as rising rates pushed their interest over £1,000.
What we did. We applied their £1,000 Personal Savings Allowance and, because their pension income was modest, part of the £5,000 starting-rate band, and advised moving a chunk of savings into an ISA and into their spouse's name.
The outcome. The starting-rate band sheltered most of the excess interest, the ISA transfer removed future interest from tax, and the spouse's allowance absorbed the rest, cutting the bill close to nil.
The savings were the same; using the allowances and wrappers properly is what removed the tax.
Why People Come to Us
Questions Answered
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Or email info@yourtaxhelp.co.uk, we typically respond within two business hours.
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