Your Questions Answered by TaxAssist Accountants

Is my bank interest income taxable?

I have received a lot more interest from my bank this year because of the increase in savings interest rates. I am a higher rate taxpayer and earned almost £1,000 of interest across my accounts. Please could you let me know if I will need to pay tax?

Answer

As a higher-rate taxpayer, you are entitled to a personal savings allowance of £500. This means that £500 of your interest income is tax-free. The remainder of your interest income will be taxed at your usual tax rate. As a higher rate taxpayer this is 40% in England, Wales and Northern Ireland and 42% in Scotland. 

If you prepare a self-assessment income tax return you will need to ensure you report all your savings income, the tax payable on your savings income will then be included in your tax liability. 

If you have an accountant who prepares your tax return, provide them with details and evidence of the interest you received - you may have received an annual interest declaration from your savings provider which covers the tax year and can be used for this purpose.

Information supplied by Cheryl Hopkins, Chartered Certified Accountant, TaxAssist Accountants. Advice shared in this article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayers’ circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take, action, as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.