In April 2016, the Government changed legislation so that UK individuals no longer pay tax on the first £1,000 of interest earned on their savings (£500 if you’re a higher-rate taxpayer) across all saving products.
- Basic rate (20%) taxpayers can earn £1,000 interest with no tax
- Higher rate (40%) taxpayers can earn £500 interest with no tax
- Additional rate (45%) taxpayers don’t receive an allowance
The savings income that counts towards your Personal Savings Allowance includes:
- Interest from banks, building societies and other account providers
- Interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts
- Income from government or company bonds
- Some types of purchased life annuity payments and gains from certain life insurance contracts
The Personal Savings Allowance and ISAs
As Cash ISAs already feature tax-free interest, the Personal Savings Allowance doesn’t apply to them - which means you can really make the most of your tax-free savings.
The Personal Savings Allowance and joint accounts with differing rate taxpayers
If you have a joint account and one of you pays a higher rate of tax, the interest earned is assumed to be split equally between you. For instance, if one of you is a basic rate taxpayer and the other a higher rate tax payer, then your joint Personal Savings Allowance would be £1,500.
How to pay savings tax if you owe it
If the interest you earn exceeds your Personal Savings Allowance, HMRC will usually collect tax on the excess by changing your tax code in the PAYE system. If you complete a Self-Assessment tax return, you should continue doing so as normal. Further information is available on the HMRC website.
NOTE: Tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.
Saving With Ford Money
How to open and manage accounts, deposit information, Nominated Account, passwords, your Customer ID - and a guide to tax and savings.
Online Account Management
Run your Ford Money account: from changing interest frequency and making withdrawals, to login troubleshooting and customising your account.