Tax Free Savings!

the different types of isa

From the beginning of the new tax year (6th April), adults in the UK will no longer be required to pay tax on the first £1000 of savings interest earned.

Currently, for every £100 interest earned, basic rate taxpayers will pay £20 in tax, or £40 if the person is a higher rate tax payer, however from 6 April the new personal savings allowance means every basic-rate taxpayer can earn £1,000 interest without paying tax on it.

Each individuals Personal Savings Allowance depends of what rate of tax payer they are; 

  • Basic-rate tax payers (those who pay 20% tax) will be able to earn £1,000 interest with no tax
  • Higher-rate tax payers (those who pay 40% tax) will be able to earn £500 interest with no tax
  • Additional rate tax payers (those who pay 45% tax) won’t qualify for a Personal Savings Allowance

Which forms of interest are covered? 

Interest from;

  • Bank Accounts
  • Savings Accounts
  • Credit Union Accounts
  • Building Societies
  • Corporate Bonds
  • Government Bonds & Gilts (including interest earned on other currencies held in UK-based savings accounts)
  • Peer to Peer Lending
  • Interest distributions (not dividend) from authorised Unit Trusts, Open-Ended Investment Companies (OEICS) and Investment Trusts and most Purchased Life Annuity payments.

Dividend income from shares or funds is not included!

Any interest or payments that you earn from Tax Free investments is in addition to the Personal Savings Allowance so you don’t need to deduct this from your £1000 (BRT) or £500 (HRT) allowance.

From the new tax year you will note that all banks and building societies will pay all savings interest due to you gross.

You should note that your Savings Personal Allowance is completely separate from the Personal Allowance all taxpayers get on their standard income.

Of course there’s a lot more to this that we have detailed on here so, if you have any questions or you’d like to enquire about savings please feel free to get in touch by completing the form below. We will get back to you as soon as we can.

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