Richardson & Associates Independent Financial & Mortgage Services Ltd

Income Tax On Savings

You don’t pay tax on any income received within your ISA and on most National Savings & Investment products. For most other products interest on savings is taxed at 20% normally at source which means the tax is deducted before you receive the income. If you check your interest or dividend statement, you will normally see a tax credit showing the tax deducted.

From April 2016, if total taxable income is £17,000 or less an individual will not pay any tax on savings income. However, most people can earn some tax-free savings income from savings without paying tax which is called a Personal Savings Allowance.  

For those in the Basic rate Income Tax band the tax free savings income is £1,000

For those in the Higher rate Income Tax band the tax free savings income is £500.

For those in the Additional rate Income Tax band the tax free savings income is £0.

Income tax is then paid on any income above this at the usual rate of Income Tax.

You can reclaim tax paid on your savings income if it was below your allowance and where this is the case you must reclaim the tax within 4 years of the end of the relevant tax year.

If you receive income on a joint account then, half of the income will be considered as yours and half as your partners.

Higher or additional rate taxpayers will need to pay more tax and normally you will do this through your self-assessment form.

TAX TREATMENT IS BASED ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN THE FUTURE.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX PLANNING.

Also See:

Tax Planning Income Tax