Your Personal Saving Allowance

You have a ‘Personal Savings Allowance’ or PSA, which means you can earn interest – from savings, loans – such as peer-to-peer or bonds – tax free up until a certain amount. Your tax-free allowance depends on how much income you earn in a tax year – that’s from Apri 6th to April 5th the following year.

Basic Rate tax-payers can earn £1,000 interest a year tax-free and Higher Rate tax-payers can earn £500. Unfortunately, Additional Rate tax-payers don’t have an allowance and have to pay tax on any interest they earn outside of ISAs.

Not sure which income tax-band you are in? Here’s a breakdown:

Your Income	Income Tax Band	Your Tax-Free Allowance
Up to £11,850	No Rate	£1,000
£11,851 to £46,350	Basic Rate	£1,000
£46,351 to £150,000	Higher Rate	£500
Over £150,000	Additional Rate	£0

Earning more interest than your PSA? Open a Cash ISA for interest from savings, a Stocks & Shares ISA if interest is from Bonds or an Innovative Finance ISA if interest is from Peer-to-Peer lending.

Side note: You can only open one Cash ISA and one Investment ISA in a tax-year.