Savings Interest and Taxation

If you live in the United Kingdom** there may be an opportunity for you to earn interest on your savings without having to pay tax.

Personal Savings Allowance

Your Personal Savings Allowance refers to how much interest you, as an individual, can earn before you have to start paying tax on it. This amount is based on your Income Tax band.

The following Personal Savings Allowance amounts apply.

Basic rate tax payerHigher rate tax payerAdditional rate tax payer
£1,000 tax-free savings £500 tax-free savings £0 tax-free savings

If you earn any interest over your above stated allowance, you'll be taxed at your usual Income Tax rate. Leeds Building Society no longer deduct tax from the interest we pay you. H M Revenue & Customs (HMRC) will advise you how to pay back any tax you owe. 

You can find out more about your Personal Savings Allowance in HMRC's guide.

ISA Tax-Free Accounts

Unlike most savings, interest earned from ISAs does not count towards your Personal Savings Allowance, and an amount totalling up to your ISA allowance can be earned tax-free.

For the 2018-2019 tax year, this allowance is £20,000 per person.

The ISA allowance amount can either be earned from one ISA, or from multiple different types. For example, you may earn interest from both a Cash ISA and a Lifetime ISA at the same time.

The interest earned from all of your ISA accounts will be added together and go towards your overall ISA allowance.

Spousal ISAs

As of 6th April 2018, when an ISA holder passes away, their account can still benefit from the tax-free status until the completion of the deceased’s estate, closure of the account or on the third anniversary of the death of the account holder – whichever is soonest.

If the deceased had a spouse or civil partner living with them, they may be entitled to open a Spousal ISA. If the spouse or civil partner chooses to open a Spousal ISA, then we’ll let them know how much they can invest in their own name.

This is known as Additional Permitted Subscriptions and will not count towards any current year subscriptions.

The time limit for investing in a Spousal ISA ends 3 years after the date of death, or 180 days after the administration of the estate is complete, if this is later.

We don’t currently offer a Spousal ISA, but other banks and building societies do. If you would like to find out more information please get in touch.

Prior to 6th April 2018, we will have moved the deceased's funds to a non-ISA account and informed the next of kin.

The Common Reporting Standard

We're aware that some of our customers may be required to pay some, or all, of their tax to a country outside of the United Kingdom (i.e. are tax residents elsewhere).

To ensure transparency between participating countries, the Common Reporting Standard (CRS) requires governments around the world to exchange financial account information in an effort to end tax evasion.

To remain CRS compliant, we'll ask you a few questions upon opening an account or changing your details. These questions will be mostly about your tax residency and whether you are a citizen of the United States of America.

Where can I find my interest earnings?

To help you keep track of your savings, we'll send you a statement each year outlining how much interest you have earned.

Don't hesitate to get in touch if you wish to request additional statements, even for closed accounts. We are happy to supply these to all customers.

 

This webpage is not tax advice and Leeds Building Society cannot provide tax advice. However, we will try and help with any queries you may have. Please visit your local branch or telephone 0113 225 7777*.

**For tax purposes, the Channel Islands and the Isle of Man are not in the UK.