On 6 April 2016, HMRC introduced the Personal Savings Allowance (PSA). This means you could earn up to £1,000 of interest per tax year on your non-ISA savings accounts before having to pay tax on your interest.
The PSA extends to other interest-bearing products, such as current accounts. Interest from cash ISAs doesn't count towards your PSA, as it is already tax-free.
The amount of your Personal Savings Allowance depends on your income tax rate:
If you're a basic rate taxpayer, you can earn up to £1,000 of interest without paying tax.
If you're a higher-rate taxpayer, you can earn up to £500 of interest without paying tax.
If you're an additional rate taxpayer (45%), you don't get an allowance.
The PSA doesn't just apply to savings accounts. It relates to any interest earned, so the rules extend to other products, including interest-bearing current accounts. Interest earned on cash ISAs doesn't count towards your PSA, because it's already tax-free.
The government also introduced new rules to support the PSA, so banks and building societies are no longer deducting income tax from interest earned on savings and current accounts.
Regardless of when you opened your account, if the interest is paid after 6 April, you will receive it without tax deducted. This also applies when closing an account, where interest is added at the point of closure.
Do I need to do anything?
You don't need do anything to receive interest without tax deducted, this happens automatically.
If the interest you earn on accounts you hold with Darlington Building Society and any other provider(s) is more than your PSA, tax may become due and will need to be paid to HMRC. HMRC will normally collect tax by changing your tax code or through self assessment. See the HMRC Guidance on PSA for more information.
Sometimes it's easier to discuss things face-to-face. All our branches have staff ready and waiting to talk. If you’d like to discuss your options or you think you need help, call in at your local branch.
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