What is the Personal Savings Allowance?
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In short: Basic-rate taxpayers can earn £1,000 of cash savings interest a year tax-free; higher-rate £500; additional-rate £0.
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Reviewed by Kaiser Khan
The Personal Savings Allowance lets most people earn some interest on cash savings without paying any Income Tax on it. The amount depends on your tax band: £1,000 a year for basic-rate taxpayers, £500 for higher-rate, and nothing for additional-rate (45%) taxpayers.
Cash held inside a Cash ISA, NS&I Premium Bonds and most ISA-wrapped products is tax-free regardless of your PSA.
If you go over your allowance, HMRC usually collects the tax by adjusting your tax code automatically — banks send them the interest data each year.
Primary source: gov.uk/apply-tax-free-interest-on-savings
Part of our Savings & ISAs
This quick answer sits inside our wider savings & isas hub — with sub-guides, calculators and step-by-step explainers on the same topic.
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