Sarah Bradford outlines how savings income is taxed and highlights options for earning savings income tax-free.
Rising interest rates and frozen tax thresholds may mean that you will now be liable for tax on your savings income when previously you were able to enjoy it tax-free. However, it is still possible to enjoy some savings income tax-free, regardless of the rate at which you pay tax.
Banks notify HMRC of interest earned on bank accounts. If you are taxed through PAYE, HMRC will adjust your tax code to collect any tax due. If you are taxed through self-assessment, you should include the interest on your tax return. The associated tax will be paid through the self-assessment system.
Complicated rules
The rules governing the taxation of savings income are quite complicated, as the allowances that are available depend on the rate at which you pay tax and what
