Q. I’m going to become a higher-rate taxpayer, which means my savings will start to be taxed. How do I pay this to HMRC?
A: Congratulations on your earnings going up. You have highlighted that higher-rate taxpayers get a smaller Personal Savings Allowance (PSA) than lower-rate taxpayers (£500 versus £1,000). It is important to note that it is only the interest on your savings that gets taxed, and not the savings themselves. Your rate will be 40% (rising to 42% from April 2027).
Regarding paying this tax, you don’t need to do anything. Banks report how much interest you earn to HMRC every year, then HMRC works out if you need to pay more tax. If you do, it will adjust your tax code in order to collect the extra tax over the next year through your employer’s PAYE scheme, or it may ask you to complete a self-assessment tax return.
