Personal Savings Allowances
From 6 April 2016, a Personal Savings Allowance will be introduced. For a basic rate taxpayer savings income of £1,000 will be tax free, higher rate taxpayers will be able to earn up to £500.
This allowance is not available for additional rate taxpayers. This equates to a rate of interest of 2% on a deposit of £50,000 for a basic rate taxpayer being paid free of tax.
Tax will no longer be deducted from interest earned on deposit on:
- Bank and building society accounts
- Accounts with providers like credit unions or National Savings and Investments (NS&I)
- Interest distributions (but not dividends) from authorised unit trusts, open-ended investment companies and investment trusts
- Government or company bonds
- Most types of purchased life annuity payments
This new allowance has no impact on interest received from Individual Savings Accounts (ISAs).
HM Revenue and Customs (HMRC) are issuing PAYE code numbers to many who are in employment or are pensioners, estimating the taxable proportion of interest (after deducting the allowance). These figures are estimates and can be vastly inaccurate. If you believe a code number issued to you is inaccurate, please speak to us. Whilst PAYE code number is only a means of estimating the tax liability for the year, if it is collecting too much tax then it needs to be corrected.
Source: ProActiv Tax