Changes to the taxation of savings income

Changes to the income tax rules from 6 April 2016 which affect the taxation of savings income.

From 6 April 2016, a basic taxpayer may be able to receive up to £1,000 in savings income tax free. Higher rate taxpayers will be able to receive up to £500.

Savings income includes the following:

•     interest from banks and building societies
•     interest from National Savings and Investment accounts
•     income from government bonds
•     interest distributions from authorised unit trusts

As a result of this from 6 April 2016 interest will be paid gross. Interest from ISAs is not included in your Savings Allowance (SA) because it is already tax free.

No action is required to claim the allowance. If the amount of savings income you receive is higher than the allowance, banks and building societies will provide details to HMRC and they will amend your tax code to collect any tax due. If you complete a Self Assessment tax return you should carry on doing this as normal.

If you have any queries on the changes to income tax please contact us.

Link: GOV.UK

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