Personal Savings Allowance


See below for information about the Personal Savings Allowance.

What is a Personal Savings Allowance?

On 6 April 2016, the government introduced a Personal Savings Allowance (PSA) meaning the vast majority of savers won’t pay tax on their savings interest.

The Personal Savings Allowance is the amount of interest that can be earned tax free and is different depending on what rate of tax you pay. It’s an annual allowance and applies to a tax year (6th April to the 5th April).

  • Basic-rate (20%) taxpayers will be able to earn £1,000 interest with no tax.
  • Higher-rate (40%) taxpayers will be able to earn £500 interest with no tax.
  • Additional-rate (45%) taxpayers do not get an allowance.

How would a Personal Savings Allowance affect me?

Following the introduction of the Personal Savings Allowance on 6 April 2016, we will no longer deduct tax and interest on your savings will be paid gross.

If you exceed your Personal Savings Allowance you'll be responsible for paying any tax you owe on the interest. However HMRC will normally collect the tax by changing your tax code. If you fill in a Self-Assessment tax return, you should carry on doing this as normal.

If I can likely save tax-free with a Personal Savings Allowance, what about ISAs?

It depends on your personal circumstances, but ISAs are still attractive because:

  • The interest you earn on an ISA is tax-free and so does not count towards your PSA.
    An ISA is protected from tax, year after year.
  • Spouses can inherit their deceased partner’s ISA whereas you can’t inherit a PSA.
  • As rates rise you’re likely to earn more interest so your PSA will be used quicker.
  • Any interest earned on non-ISA accounts that is above the PSA will still be taxed.

Where can I get more information on the Personal Savings Allowance?

For more information on the Personal Savings Allowance (PSA), visit

For more information about interest on children's savings accounts, visit

Remember you can subscribe to a Co-operative Bank / Britannia Cash ISA as long as you have not subscribed to another cash ISA with another provider in the current tax year.

Savings terms explained

AER stands for Annual Equivalent Rate and shows what the interest rate would be if it were paid and added to your account each year.

Fixed interest means the rate stays the same until the account matures.

Gross is the rate of interest payable before any tax is taken off.

Tax-free means you will not pay any tax on your interest.

Tax year runs from 6 April to 5 April.

Variable interest means that it could go up or down.

Business day is usually Monday to Friday excluding bank holidays.

Any reference to tax is based on our understanding of current tax regulations which may change in the future and depends on the customer's individual financial circumstances.

The Co-operative Bank reserves the right to decline to accept any application and/or deposit.

FSCS logo

Financial Services Compensation Scheme

Your eligible deposits held by a UK establishment of The Co-operative Bank plc are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. This limit is applied to the total of any deposits you have with the following: The Co-operative Bank, Britannia and smile. Any total deposits you hold above the limit between these brands are unlikely to be covered.

Please click here for further information or visit

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