New Personal Savings Allowance Introduced from 6th April 2016

5 April 2016

Tax Changes

As a result of changes being introduced by HM Revenue and Customs (HMRC) in how savings interest is taxed, all banks and building societies will be required to pay interest gross from 6th April 2016.

This means that tax will not be deducted when interest is paid to your account. This will form part of your new Personal Savings Allowance:

  • Basic rate tax payers will not pay tax on the first £1,000 of savings income earned.
  • Higher rate tax payers will not pay tax on the first £500 of savings income earned.
  • Additional rate tax payers will pay tax on all savings income earned.
You will only need to pay tax on any savings income you earn above your Personal Savings Allowance. The new Personal Savings Allowance applies to the total savings income you earn from all banks/building societies and not just from Monmouthshire Building Society. Please note that ISA accounts will continue to be free from UK tax for eligible customers, which means that any interest earned doesn’t count towards your Personal Savings Allowance.

Will I have to do anything?

No, you don’t need to do anything to claim your Personal Savings Allowance. If you’re a basic rate taxpayer and have savings income of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.

HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

From 6th April 2016 onwards, any interest on your savings will be paid gross. If you have previously completed an R85 or R105 form these will no longer be required after 6th April 2016. If you fill in a Self Assessment tax return you should carry on doing this as normal.

HM Revenue and Customs has produced a guide to the Personal Savings Allowance which you can find here.

Further information can be found on the HMRC website where you can also find an easy-to-read Personal Savings Allowance fact sheet.

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