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Personal Savings Allowance (PSA)

What is a PSA and why does it matter to me?

What is a PSA

In a nutshell, it allows basic rate taxpayers to earn up to £1,000 interest on their savings each year without paying any income tax on it.

Higher rate taxpayers have a PSA of £500 before they pay tax while additional rate taxpayers who earn £150,000 over the personal allowance don’t qualify.

What does the PSA mean for me?

Put simply, the PSA means that:

  • The first £1,000 of savings interest that basic rate taxpayers earn and the first £500 for higher rate taxpayers is free from income tax.
  • Most people no longer pay tax on their savings interest.
  • It’s your responsibility to pay any tax you may owe directly to HM Revenue & Customs, according to your individual circumstances.

Please visit www.gov.uk/hmrc/savingsallowance for more information.

The maximum you can gain thanks to the allowance is £200 if you earn £1,000 interest.

You need quite significant savings to get the full benefit of the changes, but even those with a more modest nest egg will get something back.