Introduction
Interest from savings may look small, but HMRC keeps a close eye on it. Whether it’s from a bank account, fixed bond, or ISA, you need to know when it’s taxable. For landlords, things become more complex—because interest income is declared alongside property income in a landlord self assessment tax return.
This guide explains how savings interest is taxed, how to report it correctly, and how landlords can manage both rental and savings income in one return.
What is Tax Return Interest on Savings?
When you earn interest on your savings, it counts as taxable income. Banks and building societies report it to HMRC, but you’re still responsible for declaring it in your tax return interest on savings.
Sources include:
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Savings accounts
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Fixed-term bonds
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Credit union accounts
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Peer-to-peer lending interest
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Non-ISA investment products
If your savings interest falls within allowances, you may not owe tax, but it must still be declared in many cases.
How Savings Interest is Taxed
The UK system offers allowances that reduce or eliminate tax on savings interest.
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Personal Allowance: £12,570 of income tax-free (if not already used up by other income).
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Personal Savings Allowance:
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£1,000 for basic rate taxpayers
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£500 for higher rate taxpayers
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£0 for additional rate taxpayers
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Starting Rate for Savings: Up to £5,000 interest tax-free (only if other income is below £17,570).
If your interest goes beyond these, you must declare and pay tax.
When Must You File a Tax Return for Interest?
You must complete a tax return interest on savings if:
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Interest plus other untaxed income exceeds allowances
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You’re already filing a self assessment (e.g., as a landlord or self-employed)
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You earn more than £10,000 in total from savings and investments
For landlords, this is almost always relevant, since rental income already requires a return.
Landlord Self Assessment Tax Return and Savings Interest
If you’re a landlord, your landlord self assessment tax return combines multiple income sources:
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Rental profits
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Self-employment income (if any)
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Savings interest
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Dividends and investments
All taxable income streams go into one return, so interest and rental figures must be reported together.
Example: A Landlord with Savings
Let’s say Emma earns:
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£20,000 salary from employment
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£8,000 rental profit
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£1,200 savings interest
Her salary is taxed under PAYE. But she must file a landlord self assessment tax return to declare the rental profit and the interest. Her savings interest exceeds the £1,000 Personal Savings Allowance for basic-rate taxpayers, so £200 is taxable.
By combining rental and savings income, she ensures compliance and avoids penalties.
How to Report Savings Interest on a Tax Return
Step 1: Gather Bank Statements
Check annual interest summaries from banks and building societies.
Step 2: Log Into HMRC Online
Go to your self assessment form.
Step 3: Add Savings Income
Enter interest earned in the “Interest and Dividends” section.
Step 4: Combine with Other Income
Include rental income, self-employment profits, and other untaxed income.
Step 5: Claim Allowances
Ensure allowances are applied correctly—personal allowance, personal savings allowance, and starting rate if eligible.
Step 6: Submit and Pay
Review your tax bill and submit by the deadline.
Common Mistakes People Make
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Assuming interest under £1,000 doesn’t need reporting
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Forgetting about multiple savings accounts
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Not checking peer-to-peer lending statements
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Overlooking foreign bank interest
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Mixing up gross and net figures
Even if HMRC has some data from banks, you are legally responsible for accuracy.
Deadlines You Must Meet
The deadlines for declaring tax return interest on savings follow the same self assessment timeline:
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Register: 5 October after the tax year ends
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Paper return: 31 October
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Online return: 31 January
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Payment deadline: 31 January
Why Landlords Need to Pay Extra Attention
A landlord’s tax situation is more complex than average. Rental income must be combined with savings interest, dividends, and any side-business income. HMRC expects complete transparency.
If landlords ignore small amounts of savings interest, it may trigger unnecessary investigations—especially since banks already share data with HMRC.
When to Use Professional Help
Some people manage their returns alone. But if you’re juggling rental properties and savings accounts, hiring an accountant helps. A professional ensures:
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All allowances are claimed
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Figures are accurate across different income types
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Penalties are avoided
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You don’t pay more tax than required
A landlord self assessment tax return accountant can save significant time and reduce stress.
Penalties for Non-Compliance
Missing or misreporting savings interest carries risks:
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£100 fine for late submission
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Daily fines after 3 months
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5% penalty for unpaid tax after 30 days
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Interest charges on unpaid tax
For landlords with multiple properties and accounts, these can add up quickly.
Tips to Simplify the Process
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Use banking apps to track monthly interest
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Download yearly summaries from online banking
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Keep property and personal accounts separate
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File early to spot mistakes sooner
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Consult HMRC’s savings and investment guide if confused
Conclusion
Declaring tax return interest on savings is a vital part of self assessment in the UK. Even small amounts may need to be reported, especially for those already completing a landlord self assessment tax return.
By staying organized, using allowances, and meeting deadlines, you can handle this smoothly and avoid penalties. For landlords, combining rental and savings income into one accurate return ensures compliance and financial peace of mind.
The bottom line: don’t ignore savings interest. Declare it, claim your allowances, and file correctly.
