Get your head around the 2024/25 Personal Savings Allowances and ISA limits
The Personal Savings Allowance (PSA) allows individuals to earn interest on their savings without paying tax on it, up to certain limits. When it comes to tax on savings income there is a starting rate of 0% on income up to £5,000. However, this is not available if taxable non-savings income exceeds the starting rate band. Then following that the allowances are as follows:
1. Basic Rate Taxpayers: eligible for a Personal Savings Allowance of up to £1,000 for the tax year 2024/2025. This means someone can earn up to £1,000 in interest on their savings without paying any tax on it.
2. Higher Rate Taxpayers: those in the higher rate tax band have a lower Personal Savings Allowance. For the new tax year the allowance is £500.
3. Additional Rate Taxpayers: Additional rate taxpayers do not have a Personal Savings Allowance. This means that all the interest they earn on their savings may be subject to tax.
It’s important to note that the Personal Savings Allowance applies to interest income from savings accounts, bank accounts, credit union accounts, and certain other types of interest-bearing accounts. It does not cover income from investments such as dividends or rental income.
Individual Savings Accounts Allowances (ISAs and JISAs)
TOP TIP: The Personal Savings Allowance is a reason why it is so important that people should make the most of tax-free investments such as an Individual Savings Accounts (ISAs), where interest earned on savings is held tax-free.
Individuals can save up to £20,000 a year in to an Individual Savings Account (ISA), there are Cash ISAs and Stocks and Shares ISAs for longer term saving. If you are saving for children you can contribute up to £9,000 in to a Junior ISA (JISA) or in to a child trust fund. You can also use a Venture Capital Trust (VCT) or Enterprise Investment Scheme (EIS) where you can get a 30% tax rebate for investing up to £2,000,000 for an EIS or £200,000 for a VCT. There is more about this later on in this guide.
Keep in mind that tax rules can change, and it’s always a good idea to check the latest information from HM Revenue & Customs (HMRC) or consult with a professional to ensure you have the most accurate and up-to-date details regarding the Personal Savings Allowance and other tax regulations.
Further Reading: How to pay less tax: utilise your tax allowances