MARCH 2015 - Help for Savers
From 6/4/15, the starting rate of tax for the first £5,000 of savings income is 0%. This is an improvement on the 2014/15 tax year where the first £2,880 was taxed at 10%. Please note that for individuals where their non-savings income is greater than their personal allowance plus the £5,000 starting rate, the 0% rate of tax will no longer apply.
In addition to the above, the Chancellor announced the new personal savings allowance (PSA) which will apply from 6/4/16. The PSA will exempt the first £1,000 of savings for basic rate tax payers and the first £500 for higher rate taxpayers. PSA is not available to additional rate tax payers.
This means from the 2016/17 tax year, for an individual who receives £16,800 of interest (and has no other income), no tax would be due as the income will be covered by his personal allowance of £10,800, the starting rate of £5,000 and the PSA of £1,000.
The banks and building societies will no longer have to collect basic rate tax at source from 2016/17, meaning that any tax due will be collected via the tax return or the new digital tax account. For those taxpayers who are employed, any tax due on savings income will be collected through their PAYE tax code