Does interest income reduce personal allowance even if covered by PSA?

If I earn £100,000 via salary and an additional £500 in bank interest, is my personal allowance still reduced (by £500 / 2 = £250) even though the interest income is not taxed as it is covered by the PSA?

Hi ,
 

That's correct, as bank interest received is included in your adjusted net income calculation  see : Income Tax rates and Personal Allowances  .  Thank you .