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Tax Calculation Formula:
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The Income Tax Calculator Savings Interest helps estimate the tax payable on savings interest income based on your marginal tax rate and Personal Savings Allowance (PSA). It calculates the tax amount using the standard UK tax formula for savings interest.
The calculator uses the tax formula:
Where:
Explanation: The formula calculates tax only on the amount of interest that exceeds your Personal Savings Allowance, applying your marginal tax rate to that excess amount.
Details: Accurate tax calculation on savings interest is essential for proper financial planning, tax compliance, and avoiding underpayment or overpayment of taxes to HMRC.
Tips: Enter your total savings interest in GBP, select your marginal tax rate, and input your Personal Savings Allowance. All values must be non-negative numbers.
Q1: What Is The Personal Savings Allowance?
A: The PSA is the amount of savings interest you can earn each tax year without paying tax: £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and £0 for additional rate taxpayers.
Q2: How Is The Marginal Tax Rate Determined?
A: Your marginal tax rate depends on your total taxable income: 20% for basic rate (£12,571-£50,270), 40% for higher rate (£50,271-£125,140), and 45% for additional rate (over £125,140).
Q3: Are All Savings Accounts Taxable?
A: Most savings accounts generate taxable interest, but ISAs (Individual Savings Accounts) are tax-free and don't count toward your PSA calculation.
Q4: When Do I Need To Pay Tax On Savings Interest?
A: You may need to complete a self-assessment tax return if your savings interest exceeds your PSA, or HMRC may adjust your tax code to collect the tax owed.
Q5: What If I Have Multiple Savings Accounts?
A: You must add together all taxable interest from all savings accounts when calculating your total interest for tax purposes.