With the new Personal Savings Allowance, savings just got less taxing and even more rewarding.


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Read HMRC's full guide on Personal Savings Allowance...

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The Personal Savings Allowance


From 6 April 2016, one of the biggest changes for savers ever is was introduced, the Personal Savings Allowance.


The personal savings allowance affects how much tax you pay on the interest earned on your savings. See the below table for the most up to date allowance.


How your Personal Savings Allowance depends on your taxable income:

Tax band* Basic rate tax - 20% Higher rate tax - 40% Additional rate tax - 45%
Personal savings allowance £1,000 £500 No allowance

Source: HMRC

*Scottish tax rates may differ


Basic rate taxpayers are able to earn up to £1,000 in savings interest per year, tax-free. Higher rate taxpayers are eligible for a £500 tax-free allowance per year. Additonal rate taxpayers are not be entitled to a Personal Savings Allowance. The majority of savers won’t need to do a thing, as they’re not likely to earn more than the Personal Savings Allowance therefore most savers will receive tax free interest.


This is a big change for UK savers and we want our customers to be as well-informed as possible. So this part of our website is dedicated to helping you understand your new Personal Savings Allowance.


Helpful links:


Download our interactive guide to the Personal Savings Allowance  >>


Read our blog for a CEO's take on the Personal Savings Allowance  >>


Visit the HMRC website, for their full technical guide  >>

What is classed as savings income?

According to the Government, savings income includes interest from banks and building society accounts, accounts with providers such as credit unions and some National Savings & Investments products.


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 the interest element of most types of purchased life annuity payments.

Who's responsible for paying any tax I owe?

You are. The good news is that you don’t need to do anything if you earn less income from savings than your Personal Savings Allowance. Anything over this will be deducted via the PAYE system. HMRC will collect the tax by changing your tax code accordingly. Banks and building societies will send HMRC all the information they need. You now become responsible for making sure you pay the right amount of tax. If you're not sure you should fill-in a Self Assessment Tax return annually.

What happens with joint accounts

With a joint account the interest is split 50/50 so each saver will be credited with half of the interest. This means that savers will be due to pay any tax according to their Personal Saving Allowance.

What does this mean for RCI Bank customers?

From 6 April we will no longer deduct tax from your savings and you'll become responsible for paying any tax you owe above your personal savings allowance.


As a result we've updated the sections relating to tax in the documents which make-up your agreement with us, effective from 6 April. You can find the new documents here.