Review your mix of income

tax deadline

All interest you receive is taxable, unless it is from an ISA, but banks and building societies don’t deduct tax from interest paid to individuals. For most taxpayers the rate of tax payable on that interest is 0%, so no tax is in fact due.

This nil tax rate applies where your savings income falls within your

Savings Rate Band (SRB), which is worth up to £5,000, or within your personal savings allowance (PSA), which is worth £1,000 for basic rate taxpayers or £500 for higher rate taxpayers. Any savings income that falls outside the SRB or PSA is taxed at your marginal income tax rate (20%, 40% or 45%).

The available SRB depends on how much taxable income you receive, other than interest and dividends. Examples include salary, pensions, trading profits or rent. If you can control the type of income you receive, you can reduce the total tax you pay for the year, just like Harry in the example below.

Can your mix of income be made more tax-efficient?