Tax On Savings Interest 2022/2023

Tax Calculation Formula:

\[ Tax = \max(0, \text{interest} - \text{PSA}) \times \text{tax\_rate} \]

Tax Amount (GBP):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What Is The Tax On Savings Interest?

The tax on savings interest calculation determines how much tax you need to pay on your savings interest based on your marginal tax rate and personal savings allowance for the 2022/2023 tax year.

2. How Does The Calculator Work?

The calculator uses the tax formula:

\[ Tax = \max(0, \text{interest} - \text{PSA}) \times \text{tax\_rate} \]

Where:

\( interest \) — Total savings interest earned (GBP)
\( PSA \) — Personal Savings Allowance: £1000 (basic rate), £500 (higher rate), £0 (additional rate)
\( tax\_rate \) — Marginal tax rate: 20% (basic), 40% (higher), 45% (additional)

Explanation: The calculation determines the taxable amount of savings interest (interest above your PSA) and applies your marginal tax rate to calculate the tax due.

3. Importance Of Tax Calculation

Details: Accurate tax calculation on savings interest is essential for proper tax reporting and compliance with HMRC requirements. It helps individuals understand their tax liabilities and plan their finances accordingly.

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 Personal Savings Allowance (PSA) is the amount of savings interest you can earn each tax year that is completely 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 all savings interest taxable?
A: Only interest above your Personal Savings Allowance is taxable at your marginal rate of income tax.

Q4: How is savings interest tax collected?
A: For most taxpayers, tax on savings interest is collected through self-assessment or through adjustments to your tax code.

Q5: Are there any tax-free savings options?
A: Yes, ISAs (Individual Savings Accounts) allow you to earn interest completely tax-free without affecting your PSA.