Tax On Savings

Nowadays, interest paid on all bank deposit accounts and by local authorities is paid in the same way as building societies have traditionally paid interest. You receive the interest with the basic rate tax already paid for you.

The institutions pay the tax to the Government on the interest earned by all their savers. (search for https://www.gov.uk/income-tax-rates)

Many savers do not pay tax (a lot of them are children with small savings), so the amount of tax paid averaged out over all savers is less than the standard rate of tax.

This year banks, building societies and local authorities will pay tax on your behalf at 861/8% on the interest you earn instead of 89 %.

So your net interest should be that bit higher than if you were paid it gross and then paid the tax yourself at 89 %.


Want to read more about this - Interest Rates Paid

or If You Do Not Pay Tax

Interest Rates Paid

/retirement/pensions/income/advice/interest-rates-paid.php... see: Interest Rates Paid