What is the basic rate tax rate for savings income?

The basic rate tax rate for savings income is 20%. This means that individuals who fall within the basic income tax band will pay this rate on their savings income, which includes interest earned from bank accounts and other interest-bearing investments.

In the context of the UK taxation system, the basic rate applies to individuals whose annual income falls within a specific threshold. Taxpayers can have a portion of their savings income that falls under the Personal Savings Allowance, making it tax-free up to a certain limit, but any income above that allowance is subject to the 20% basic rate tax.

Understanding the tax rates is essential for financial planning and optimizing tax liabilities. Knowledge of these rates will also help taxpayers make informed decisions about their savings and investments, knowing how much tax they would have to pay on the income generated from those savings.