1. What is the Tax on Savings Calculation?

The Tax on Savings calculation determines how much tax you need to pay on your savings interest based on your marginal tax rate and Personal Savings Allowance (PSA) for the 2024/2025 tax year.

2. How Does the Calculator Work?

The calculator uses the tax formula:

Where:

• \( interest \) — Savings interest amount in GBP
• \( PSA \) — Personal Savings Allowance: £1000 (basic rate), £500 (higher rate), £0 (additional rate)
• \( tax\_rate \) — Marginal tax rate: 0.20 (20%), 0.40 (40%), or 0.45 (45%)

Explanation: The calculation determines how much of your savings interest exceeds your Personal Savings Allowance and applies your marginal tax rate to that amount.

3. Importance of Tax Calculation

Details: Accurate tax calculation on savings is crucial for proper tax planning, ensuring compliance with HMRC regulations, and avoiding underpayment or overpayment of taxes.

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 the tax due.

5. Frequently Asked Questions (FAQ)

Q1: What is the Personal Savings Allowance?
A: The PSA is the amount of savings interest you can earn each tax year that is tax-free. It varies based on your income tax band.

Q2: Who qualifies for which PSA amount?
A: Basic rate taxpayers get £1,000, higher rate taxpayers get £500, and additional rate taxpayers get £0 PSA.

Q3: Is this calculation specific to the UK?
A: Yes, this calculation uses the UK tax rules and allowances for the 2024/2025 tax year.

Q4: What if I have multiple savings accounts?
A: You must add up all interest from all savings accounts to calculate your total taxable interest.

Q5: When do I need to pay tax on savings interest?
A: Tax on savings interest is typically collected through self-assessment or through your tax code if you're employed.