Taxation of savings

For most people, savings income, if it is taxable at all, is taxed by the bank or other financial body before you get it. This means that most people will pay the correct amount of tax on their savings automatically. But some people – particularly the retired on low income and people who are not working – could be paying too much tax. On the other hand, higher rate taxpayers may owe additional tax on their savings.

 The following pages will look at:

• Is your savings income taxable?
• Tax rates for savings
• Taxing dividends
• Special rules for joint savings accounts
• Have you paid the right amount of tax?
• The 10% savings rate of tax
• Refunds
• Receiving interest without deduction of tax
• Foreign savings

Is your savings income taxable?

Most income that you get from your savings or investments is taxable. The income that is taxable includes dividends on any shares that you own, and any interest that you get from a bank or building society.

The following income from savings is not taxable:

• Premium Bond prizes
• interest on National Savings Certificates
• interest or dividends on an ISA (individual savings account) or PEP (personal equity plan)