8 Do I pay tax on the interest I earn?

Given the availability of ISAs and recent changes to taxation in the UK it is very unlikely that you will have to pay any tax on the interest you earn on your savings.

As mentioned earlier, interest earned from ISAs is tax free. On non-ISA accounts you have to earn more than £1000 in interest (in the 2023/24 tax year) to be at any risk of having tax deducted from your interest earnings. Note that if you are a higher rate income tax payer the limit falls to £500 per tax year. Even if you do earn non-ISA interest above the threshold, you will not be liable to tax if your other income – say from a job – is low. The fact is that for the vast majority of people in the UK no tax is now paid on interest earnings.

But you might want to check if you paid income tax on interest earnings prior to April 2016. If you did, you can apply to reclaim tax that has been deducted. You will need to complete form R40 [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] and send it to HMRC (Her Majesty’s Revenue & Customs).