HM Revenue & Customs (HMRC) has clarified that if your earnings from interest exceed £10,000, tax may apply depending on the account type.
This clarification came when a customer reached out to the tax authority on X to see if they needed to file a tax return after earning more than £2,000 in interest.
HMRC explained that if interest exceeds £10,000, a Self-Assessment tax return should be prepared and submitted within the usual deadlines, to calculate whether any tax is due.
Taxpayers should also be aware that if they have other additional income outside of interest and above the personal savings allowance, which might need to be assessed – such as a regular salary or income not assessed by pay as you earn (PAYE) – they could quickly exceed this limit outlined by HMRC.
Tax-free options for saving
Interest earned from individual savings accounts (ISAs) and some National Savings Investments (NS&I) accounts is tax-free.
For example, taxpayers can save £20,000 annually in ISAs without paying tax on the amount deposited or any interest, income or capital gains from investments in an ISA.
All savers also benefit from the Personal Savings Allowance (PSA), which allows you to earn up to £1,000 of interest before you pay tax depending on your marginal rate.
| Income Tax band | Personal Savings Allowance |
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
To avoid unexpected tax liabilities, you must be aware of these thresholds and account types to make use of the tax-free allowances available to you.
Seeking the help of a tax advisor is the best way to ensure you are making informed decisions to maximise your savings.
