If you have any savings in a savings account with a bank or building society you are almost certainly paying tax on the interest (unless you have filled out a special form).
That means whatever interest YOU earn on YOUR money, the government take some of it in tax.
But you can still save some money and pay NO TAX on the interest.
You just need to open an ISA (Individual Savings Account) at any bank or building society.
You can pay up to £3,600 per tax year into a Cash ISA, and the interest is TAX FREE.
Currently for example NatWest are paying 3.51% on a Cash ISA Plus account (other companies also do them of course. Rates can vary).
To take advantage of THIS tax year you must pay your money in by 5th April 2009.
You can then pay ANOTHER £3,600 in after April 6th 2009.
Opening a Cash ISA is very easy.
1) Go to the company who you currently save with and ask for a cheque payable to you for £3.600
2) Go to any bank or building society (say NatWest) and ask to open a Cash ISA account. NatWest call theirs Cash ISA plus.
You will need to take your national insurance number plus proof of identity (passport etc).
3) They will open the account there and then and pay your cheque in. It starts earning interest right away (with no tax).
4) After April 6th 2009 you can pay in another £3.600, giving you £7,200 in a tax free savings account. In 2010 you can then pay in more.
Each year MILLIONS of pounds is paid in tax on interest on savings accounts when a lot of it can be avoided.