Martin Lewis has put out an update ahead of the HMRC tax return deadline, clarifying the rules on savings interest and tax for UK taxpayers.

The Money Saving Expert founder says it's unlikely savers will need to pay anything if they have under £20,000 in the bank, depending on which tax bracket they fall into.

In a video message, he said: "You don't pay tax on the amount of savings you have - but you are eligible to pay tax on the interest you accrue each year. You will probably have a Personal Savings Allowance, which is a special amount you can earn each year which isn't taxed.

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He continued: "People earning £12k to £50,000 a year, your PSA is £1,000. You can earn £1,000 of interest and you don't have to pay tax on it. So let us do a little bit of maths. The top paying easy access rate at the minute is about five per cent - so you'll need to have about £20,000 to accrue £1,000 in interest."

 

For those earning from £50,00- up to £125,000, there's a £500 allowance, he explains, so at a rule of thumb, those people can have around £10,000 in a high interest account before they need to think about paying tax on savings interest.

Top-rate tax payers don't have any savings allowance, so they pay tax on any interest.

The rules are complex and individual circumstances vary, so it's worth checking for each personal case.