This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: deduction of tax: TDSI: responsibilities and guidance


The primary legislation relevant to the Tax Deduction Scheme for Interest (TDSI) is at ITA07/PT15/CH2. ITA07/S851 imposes the statutory obligation on deposit takers to deduct tax from interest on ‘relevant investments’. Unlike ITA07PT15/CH3 the obligation imposed by ITA07/S851 applies to all interest, not just yearly interest.

If a deposit is not a ‘relevant investment’ and therefore falls outside of ITA07/S851:

  • Where the payer is a bank, the exemption at ITA07/S878 for interest paid in the normal course of banking business will apply (see CFM75100), enabling the interest to be paid gross, but
  • Where the payer is a deposit taker other than a bank, ITA07/PT15/CH3 is not automatically disapplied. The provisions of ITA07/PT15/CH11 will mean that, in many cases, the interest is payable gross, but each case needs to be considered on its merits.

The main secondary legislation is the Income Tax (Deposit-Takers)(Interest Payments) Regulations 2008 (SI2008/2682). The guidance notes for deposit-takers (see below) set out the various subsequent Orders that amend these regulations.


TDSI is administered by the HMRC’s Savings Scheme Office (SSO) at Bootle, part of Charities, Assets and Residence. Queries on the operation of TDSI should be addressed to SSO. Technical queries on the provisions for deducting tax at source are dealt with by CTIAA (Financial Products Team).

Investors who have questions about the tax treatment of interest they receive from banks or other deposit takers should contact their own tax office.


Comprehensive guidance on the operation of the TDSI scheme (‘TDSI - Guidance for deposit-takers’) is to the found on the HMRC website (search for ‘TDSI’).