7th December 2016
Most people are now exempt from paying any tax on their income from savings following the introduction of the Personal Savings Allowance (PSA) in April. The 'savings nil rate' - which as it's name suggest is 0% - is applied to savings income within an individual's PSA and the amount of their entitlement depends on net income.
Basic rate taxpayers can earn up to £1,000 each year in tax-free savings income, such as interest. For higher rate taxpayers the limit is £500, while additional rate taxpayers will not benefit at all, their PSA being nil. Savings income is interest from bank and building society accounts, credit union accounts or National Savings & Investments. It also includes interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts. Savings income also refers to Government or company bonds and most types of purchased life annuity payments.
The Government estimates that 95% of savers will now no longer pay tax on savings income, leaving around 1.4million still having do so, mostly additional rate taxpayers or people with unusually large savings.
For advice on savings, investments and wealth management please contact Martyn Lodge at Wise Financial Solutions on 01252 711244.