Change of Savings Legislation

The Savings Tax Legislation is changing. From April 2016, a Savings Interest Allowance is being introduced. Going forward, your bank or building society will no longer deduct 20% tax on interest earned on your savings. Instead, they will pay interest on your savings in full (gross).

Basic Rate Tax payers can now earn up to £1,000 in interest before the interest becomes taxable. Higher Rate Tax payers will have an allowance of £500 and Additional Rate Tax payers will not receive an allowance.

This allowance is in addition to the tax free status that interest receives from cash held in ISA’s.

If you earn more interest than your allowance, then you will only pay tax on the portion that exceeds the allowance.

This is the government factsheet on Personal Savings Allowance – click here