IMC Taxation Practice Test 2025 – Comprehensive All-in-One Guide to Exam Success!

The tax exemption limit for savings income at the basic rate is £1,000. This is an important aspect of the Personal Savings Allowance introduced in the UK tax system. Under this allowance, basic rate taxpayers can earn up to £1,000 in savings interest without having to pay tax on it.

This limit allows individuals to benefit from some income on their savings tax-free, which encourages saving and helps to support those with modest income through interest accrued on savings accounts. The figure of £1,000 is specifically set for basic rate taxpayers; those on a higher rate would have a lower exemption limit, reflecting a tiered approach toward tax relief on savings income. Understanding this limit is crucial for tax planning and managing personal finances effectively, as it allows taxpayers to maximize their tax-free income from savings.