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UK Savings Interest Tax Formula:
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The UK savings interest tax calculation determines the tax payable on savings interest after applying the Personal Savings Allowance (PSA). The tax is calculated only on the amount that exceeds the PSA threshold at the individual's marginal tax rate.
The calculator uses the UK savings interest tax formula:
Where:
Explanation: The calculation applies only to interest above the PSA threshold. Basic rate taxpayers have a £1,000 allowance, higher rate taxpayers £500, and additional rate taxpayers £0.
Details: Accurate calculation of savings interest tax is essential for proper tax compliance, financial planning, and avoiding underpayment or overpayment of taxes to HMRC.
Tips: Enter your total savings interest in GBP, select your marginal tax rate (basic 20%, higher 40%, or additional 45%), and the corresponding Personal Savings Allowance will be automatically set. All values must be valid (interest ≥ 0).
Q1: What is the Personal Savings Allowance (PSA)?
A: The PSA is the amount of savings interest you can earn each tax year that is not subject to tax. 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 savings interest taxed at source?
A: Most UK savings accounts pay interest gross (without tax deducted). It's the individual's responsibility to declare and pay any tax due.
Q4: What if I have multiple savings accounts?
A: You must add up interest from all savings accounts and ISAs (except those that are tax-free) when calculating your total taxable interest.
Q5: Are there any tax-free savings options?
A: Yes, ISAs (Individual Savings Accounts) allow you to save up to £20,000 per year completely tax-free, with interest not counting toward your PSA.