1. What is the UK Savings Tax Calculator?

The UK Savings Tax Calculator estimates the tax payable on savings interest based on your marginal tax rate and Personal Savings Allowance (PSA). It helps you understand how much tax you might owe on your savings income.

2. How Does the Calculator Work?

The calculator uses the UK savings tax formula:

Where:

• \( \text{interest} \) — Total savings interest earned (GBP)
• \( \text{PSA} \) — Personal Savings Allowance: £1,000 (basic rate), £500 (higher rate), £0 (additional rate)
• \( \text{tax\_rate} \) — Marginal tax rate: 20% (basic), 40% (higher), 45% (additional)

Explanation: The formula calculates tax only on the amount of savings interest that exceeds your Personal Savings Allowance at your marginal tax rate.

3. Importance of Tax Calculation on Savings

Details: Understanding your tax liability on savings helps with financial planning, ensures tax compliance, and helps you make informed decisions about where to keep your savings.

4. Using the Calculator

Tips: Enter your total savings interest in GBP and select your marginal tax rate. The calculator will automatically determine your Personal Savings Allowance and calculate any tax due.

5. Frequently Asked Questions (FAQ)

Q1: What is the Personal Savings Allowance (PSA)?
A: The PSA is the amount of savings interest you can earn each tax year without paying tax. It varies based on your income tax band.

Q2: Who qualifies for the £1,000 PSA?
A: Basic rate taxpayers (earning up to £50,270 in England and Northern Ireland) get a £1,000 PSA.

Q3: What about higher rate taxpayers?
A: Higher rate taxpayers (earning £50,271-£125,140) get a £500 PSA. Additional rate taxpayers (over £125,140) get no PSA.

Q4: Are all savings accounts taxable?
A: Most savings accounts are taxable, but ISAs (Individual Savings Accounts) are tax-free regardless of the amount saved.

Q5: How is savings tax collected?
A: For most people, tax on savings is collected through Self Assessment or adjusted through your tax code by HMRC.