All UK banks and building societies are obliged to deduct tax from the interest they pay you, unless you fit into one of a couple of exempt groups (like schoolkids, for instance) where you fill in a form to have the interest paid gross.

You also have to declare the interest on your tax return so they can take the rest of the tax off you through your tax code.

Another reason to get rid of debt instead of having savings. When I got paid off, I had too much cash in the bank for any benefit above contribution based job seekers allowance. And they wouldn't let me use cash to pay off debts so that I would qualify for more, and of course they don't give you any extra cash to pay the payments on debts!