New Tax Changes from 6th April 2016
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.
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.