how much tax to pay on interest from savings accounts
Any money you are paid in interest on your current and savings accounts is classed as income by the Inland Revenue. This means you will have to pay tax on the interest earned. The amount of tax you will pay depends on how much taxable income you have.owever, first, you need to look at which tax band your interest will be charged at by looking at the table above (if your salary is Â£21,000, for example, then the tax charged on your interest will be at 20%). Banks only pay interest at the basic rate of tax of 20% (they will not charge 40% tax on interest earned).
The net return shows how much interest you will earn once tax has been deducted at the 20% basic rate. If you are a higher or additional rate taxpayer, you will have to declare how much interest you have earned on your savings over the tax year on your self-assessment tax return and pay any extra tax you owe to HMRC.ou must then pay 40% income tax on any income above your personal allowance plus Â£31,786 to Â£150,000, and then 45% on anything you earn above Â£150,000. If tax has been deducted from your savings interest when you are a non-taxpayer, you can claim this money back by filling in the HMRC form R40.