From 6 April 2016, the personal savings allowance (PSA) will allow basic rate taxpayers to receive up to £1,000 of savings income tax-free. For higher rate taxpayers, this limit will be £500. HMRC have published guidance setting out details of what counts as savings income and how the allowance will be calculated, including some useful examples.
Savings income includes interest from:
- bank and building society accounts;
- accounts with providers like credit unions or National Savings and Investments.
It also includes:
- interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts;
- income from government or company bonds; and
- most types of purchased life annuity payments.
Interest from Individual Savings Accounts (ISAs) does not count towards the PSA as it is already tax-free.
For further information on the PSA, see the GOV.UK website at https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance.