Although the 10% rate has been abolished for most taxable income (up to the basic rate limit of £36,000), there is a special 10% starting rate for 'savings income'; that is, bank and building society interest.
HMRC explain in an item on their website that the rate at which taxpayers' saving income is taxable will depend on their earnings.
If these are less than the personal allowance plus £2,320, then some or all of the savings income will be taxable at 10%.
HMRC add that taxpayers with a mixture of earnings and savings income have to work out if they are entitled to have any of the savings income taxed at 10%. Any savings income above £2,320 will be taxed at 20%.
If a taxpayer's only taxable income is savings income, he is entitled to have the first £2,320 of income above the personal allowance taxed at 10%.
Any savings income above £2,320 will be taxed at 20%. HMRC's website includes examples of when the 10% applies.
