Tax on Interest above £1000 allowance

With high interest rates my wife will earn ~ £3500 from a 3 year fixed savings account next year in January. She gets her 1st NHS pension in March with a lump sum. I believe lump sum will be tax exempt as she joined scheme pre1998? We will have no idea what her P60 will say in April, but believe she is well within her annual Tax allowance. So does she have to declare £2500 above allowance in interest (against black & white rules) or as she will be below her overall Tax allowance for year just leave it. 


  • There is no separate "allowance" for interest.

    There are however two 0% tax bands which might be relevant for her however I suspect the £1,000 one isn't something she will be able to utilise.

    What do you guesstimate her non savings non dividend income will be in the tax year to 5 April 2024?  This is taxable earnings and pension income for most people but could include taxable DWP benefits, rental income profit etc.

    The PCLS from a DB pension is tax exempt.
  • Albermarle
    Albermarle Posts: 21,169
    First Anniversary First Post Name Dropper
    Despite the money being unavailable during the 3 year fixed term, it is quite likely/possible that the interest has been reported annually to HMRC by the provider . So in that case the interest will be spread across 3 tax years instead of just one.
    It is grey area discussed at great length on various threads on the forum.

    In any case there is no need for her to declare any savings interest unless she 1) Fills in a self assessment tax return for other reasons or 2) earn more than £10K in interest in a tax year.
    The savings providers send the info to HMRC.

  • Pennywise
    Pennywise Posts: 13,468
    Name Dropper First Post First Anniversary
    There's also the personal savings allowance to consider, where you can have income up to around £18k tax free if the balance over £12.5k is interest.
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