How different types of savings and investment income are taxed in the UK.

Savings and investment income is taxable, but the tax rules depend on the type of income you receive.  This guide breaks down the categories so you can easily identify which rules apply.

Main Income Tax Categories

HMRC applies different tax rules depending on the source of income.  The four key categories are:

Normal Income Tax

Used for:

• Employment income
• Pension income
• Property income (rental income)

Shares Income Tax

Used for:

• Dividends
• Unit trust distributions
• Investment trust income
• OEIC income

Savings Income Tax

Used for:

• Bank interest
• Building society interest
• Gilt interest
• Corporate bond interest

Life Insurance Income Tax

Used for:

• Life insurance policy gains
• Chargeable event gains
• Purchased life annuity income (special rules apply)

How Each Type of Investment Income Is Taxed

Use the correct tax category for each income source:

Expenses: What You Cannot Deduct

HMRC does not allow any deductions against savings or investment income.

This means you cannot deduct:

• Fees
• Charges
• Admin costs
• Interest expenses
• Management costs

Savings and investment income is taxed without offsetting expenses.

❓ FAQs: Savings & Investment Income

Is savings income taxable?

Yes.  Bank interest, building society interest, and bond interest are all taxable under Savings Tax rules.

Are dividends taxed differently from interest?

Yes.  Dividends fall under Shares Income Tax rules and have their own tax‑free allowance.

Can I deduct expenses from savings or investment income?

No.  HMRC does not allow any deductions against savings or investment income.

How is income from unit trusts or OEICs taxed?

These are treated as share‑based investments and taxed under Shares Income Tax rules.

Are life insurance policy gains taxable?

Some are.  Chargeable event gains are taxed under Life Insurance Income Tax rules.

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