You can find more information on this in the Students section section of the Directgov website.

You ask the Revenue for a form R85 Savings: application to receive interest without tax taken off. Or you ask your bank or building society for their equivalent of the form R85. Remember you should only sign the form if you know your total taxable income will not exceed your annual personal allowance (for people aged under 65, £6,475 for the year ending on 5 April 2011).

If you find your income exceeds your personal allowance so that you have to pay tax, don't panic. Immediately tell your bank or building society that form R85 no longer applies and that they should start deducting tax from your interest.

If you need more information about how bank and building society interest is taxed have a look here.