On 6 April 2016 the Government introduced a Personal Savings Allowance (PSA) which enables individuals to earn interest on their savings tax free, up to a certain allowance. The allowance depends on the individual’s income: basic rate tax payers are able earn up to £1,000 in savings interest tax free and higher rate tax payers will be able to earn £500 tax free. Additional rate tax payers will not have a Personal Savings Allowance.
As a result of this change, from 6 April 2016 Sainsbury’s Bank will start paying all savings interest gross, with no tax deducted.
This means that individuals who exceed their Personal Savings Allowance, or who do not have one, will owe tax on some, or all, of their savings interest. Please note that interest earned on your cash ISA will not count towards your Personal Savings Allowance because it is already tax free. For more guidance please see the latest Government publication at https://www.gov.uk/government/publications/personal-savings-allowance-factsheet, or contact HMRC at www.gov.uk/contact-hmrc or on 0300 200 3310.