The Personal Savings Allowance (PSA)
and tax on interest

The Personal Savings Allowance

HMRC introduced the Personal Savings Allowance (PSA) on 6 April 2016. It 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.

How does it affect my savings?

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.

There are government rules to support the PSA, ensuring banks and building societies do not deduct income tax from interest earned on savings and current accounts.

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 Nationwide 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.

Further information

If you want to see the total interest you've earned on your account, you can request an Interest Certificate. We do not issue these automatically so you will need to ask for one.

You can make your request in branch, through the Internet Bank or by calling 0800 30 20 11. 

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