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What The Savings Interest Tax Calculator Works Out
- Interest earned per year: balance x interest rate. GBP 30,000 at 4.5% earns GBP 1,350 a year, which is already over the basic rate allowance.
- Tax due: interest above your Personal Savings Allowance (GBP 1,000 at basic rate, GBP 500 at higher rate, nothing at additional rate) taxed at your marginal rate. At 4% to 5% a basic rate saver crosses the allowance at roughly GBP 22,000 of savings and a higher rate saver at about GBP 11,000.
- Interest kept after tax: interest minus the tax. Banks report interest to HMRC, which collects it by adjusting your PAYE code or through a simple assessment; self assessment is only needed above GBP 10,000 of interest.
- Interest and your band: interest counts as income when working out your band, so a large interest payment can drag you into higher rate and halve your allowance at the same time.
- Other income (advanced): if your wages or pension are under GBP 17,570 you also get the starting rate for savings (up to GBP 5,000 of interest tax-free, shrinking by GBP 1 for every GBP 1 of income over GBP 12,570) plus any personal allowance you have not used. Enter your other income to add these.
- Tax-free interest available (advanced): the total of the Personal Savings Allowance, any unused personal allowance and the starting rate band.
- Balance you can hold tax-free (advanced): the tax-free interest divided by your rate, so you know how much to keep in ordinary accounts before an ISA starts to pay.
- Move into a cash ISA (advanced): ISA interest never counts, so the card shows the tax saved by moving part of the balance. The annual ISA allowance is GBP 20,000, which at a GBP 1,000 or GBP 500 allowance is the whole modern case for cash ISAs.
- Fixed bond paid at maturity (advanced): interest is taxed in the year it becomes accessible, so a multi-year bond that pays everything at the end can dump several years of interest into one tax year and blow through the allowance in one go. Bonds that pay annually avoid this.
- Joint account (advanced): interest on joint accounts is split 50/50 by default, and couples can move savings to the lower-taxed partner to use both allowances.
Source and further reading: GOV.UK (HMRC): tax on savings interest.