Under the Personal Savings Allowance (PSA), the first £1,000 of income from any non-ISA savings is tax free for basic rate taxpayers and £500 for higher rate taxpayers. No PSA applies for additional rate taxpayers.
The same rules apply irrespective of whether you are a pensioner or in employment, and you can find our more at www.gov.uk.
The following types of income are classed as savings income under the PSA:
- Interest from banks, building societies and other account providers
- Interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts
- Income from government or company bonds
- Some types of purchased life annuity payments and gains from certain life insurance contracts
If you have a joint account, the interest is assumed to be split equally between you. So if, for example, you're a basic rate taxpayer and your partner is a higher rate taxpayer, you'll each get your PSA (£1,000 for you and £500 for your partner) and your half of the interest on your joint account will count towards this.