From 6th April 2016, if you are a basic rate taxpayer you will be able to earn up to £1,000 in “savings income” tax-free. Higher rate taxpayers will be able to earn up to £500. This is called the Personal Savings Allowance.
“Savings income” includes account interest from bank and building society accounts and accounts with providers like credit unions or National Savings and Investments.
On the basis that the most interest will no longer be taxable, banks and building societies will automatically stop deducting tax from your interest.
What you need to do
You don’t need to do anything to claim your Personal Savings Allowance.
If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But HMRC will automatically try to collect the tax by changing your tax code, as they will know from the banks how much interest you receive.
If you'd like to discuss your personal tax affairs in more detail, please contact us to be put in touch with your local TaxAssist Accountant.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.