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Savings 'income' is interest earned on a cash balance whether paid to you by a bank, building society or any other source.

Subscribers see your detailed guide to this topic Savings income: tax on interest

At a glance

The Starting rate band (SRB)

A starting rate applies to savings income up to a set band:

Year 2019/20 2018/19 2017/18 2016/17 2015/16 2014/15
Rate 0% 0% 0% 0% 0% 10%
Band £5,000 £5,000 £5,000 £5,000 £5,000 2,880


The SRB is subject to a complicated rule.

The Personal Savings Allowance (PSA)

The PSA applies even if you do not qualify for the Savings Band. 

From 2016/17 the PSA exempts savings income within the allowance for basic and higher rate taxpayers.

Bands and allowances

Year Savings rate SRB PSA

2016/17 onwards

0% £5,000

£1,000 basic rate payers

£500 higher rate payers

2015/16 0% £5,000 n/a
2014/15 10% £2,880 n/a

How does this work?

2018/19 example

2019/20 example

Jess's tax

Step 1: how much of the SRB is potentially available?

Year 2018/19 2019/20
Non-savings income 11,850 15,500
Less: personal allowance  (11,850) (12,500)
Amount to reduce SRB - 3,000
SRB before reduction 5,000 5,000
SRB available 5,000 2,000

 

Step 2: calculate tax due

2018/19

Income

£

Personal allowance

£

SRB

£

Taxable

£

Non-savings 11,850 (11,850) -  -
Savings 6,000  - (5,000) 1,000
Tax rates        
0% on       1,000
Tax due       nil

 

and

 2019/20

 Income

£

Personal allowance

£

SRB

£

Taxable non-savings

£

Taxable savings

£

Total

£

Non-savings 15,500 (12,500) -  3,000   3,000
Savings 4,000  - (2,000)   2,000 2,000
Total 19,500 (12,500) (2,000) 3,000 2,000 5,000
Tax calculation:            
0% tax on         1,000 (PSA)  
20% tax on        3,000 1,000  
 Tax due        600 200 800

 

For further worked examples including the interaction with the dividend allowance, and examples covering all rates of taxpayer see Savings income: tax on interest.