Do I need to pay tax on the Interest I received from my bank account?

Banks and building societies are required by law to deduct income tax at 20% from interest before they pay it to you. This does not include your ISA (Individual Savings Account) as you don’t pay tax on interest earned from an ISA. It is tax free.

Interest received other than through an ISA will therefore need to be taken into account if you want to reclaim overpaid tax as it might increase the amount of your rebate/refund.

If you are a higher rate taxpayer (40%), then you will owe the HMRC the additional 20% tax when you submit your Self Assessment tax return.

Your bank or building society should send you a summary after the end of the personal tax year to tell you how much interest you have earned and how much tax was taken off from it. You can ask your bank for a copy of this as well if you haven’t received one.

If you are a low income earner and your total Gross income is below the tax free allowance (£9,440 for 2013/2014) for a tax year, then you can register by completing form R85 so that the bank or building society won’t deduct any tax from the interest you earn.