Good news for many savers – Starting from 6 April 2016 the Personal Savings Allowance grants every basic-rate taxpayer £1,000 of savings income free from tax, with higher-rate taxpayers receiving a £500 allowance. Additional-rate taxpayers on the top 45% rate however won’t receive an allowance at all. Meanwhile, if your taxable income is less than £17,000 you won’t pay tax on any savings income. Interest from sources that are already tax free such as assets held in ISAs and Premium Bond ‘winnings’ won’t count towards the allowance.
To reflect this change banks and building societies will automatically start paying interest rates gross – that is with no tax deducted – from 6 April 2016. Presently, banks pay interest net (with 20% basic rate tax deducted) unless the account holder has declared themselves a non-taxpayer by completing an R85 form.