Can i be taxed on my savings

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Whether you're putting something away for a rainy day, investing for retirement or anything in between, there are likely to be tax savings and allowances you can benefit from. There may also be some pitfalls to look out for. This guide will help you get to grips with how tax on savings interest is calculated, how the personal savings allowance works and whether your investments could be subject to tax.

Like with the starting rate for savings, the Personal Savings Allowance lets you earn a certain amount of interest from your savings tax free. Depending on the Income Tax band your income falls under, the Personal Savings Allowance is a different amount:. Here are the limits for the amount of interest you can earn tax-free. See the starting rate for savings section, above, for more details. The amount of tax depends on your income. If you live in Scotland, the tax income thresholds and rates are slightly different.

For instant money guidance based on your circumstances, get started with our Money Navigator Tool. Some savings products pay interest that is always tax-free, regardless of how much you earn or other savings interest you are receiving. Most savers no longer need to save into an ISA to earn some interest tax free, thanks to the introduction of the Personal Savings Allowance.

If you have an investment fund that is invested in shares, then you may get distributions that are taxed in the same way as dividends.

Join our private Budgeting and Saving Facebook group for money-saving tips and support from a community of savers. Stocks and shares ISAs are tax-efficient investments because all capital gains, interest, and dividend income is completely tax-free. Where the investments in your stocks and shares ISA do not pay dividends, but instead pay interest for example, government and corporate bonds , the interest paid remains tax-free. With these funds, part of the proceeds you receive count as income and are typically taxed, while part may come from gains due to rising share prices.

With any type of investment, where there is a risk you could lose your money, consider taking regulated financial advice to help you choose which type of investment is right for you. You might have to pay for the advice, but it could save you a lot of money and worry in the long run.

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Illness and disability Managing costs, extra financial support, help with work or study. If your interest on savings pushes you over your combined allowance, you will need to pay tax at your current Income Tax rate. Depending on your personal circumstances, any tax on savings will be paid a different way:. With this guide, you should have a better idea about whether you need to pay tax on interest from savings and how to work out how much that tax bill will be.

If you are gaining interest from P2P lending and think you need to pay tax, you can visit our help centre to find out how. Tax treatment depends on your individual circumstances and may be subject to change in future.

If you have any questions on tax you should seek advice from an independent financial or tax advisor. Skip to main content. What is the starting rate for savings?

What is the Personal Savings Allowance?