New Personal Savings Allowance on the way

The Government is introducing a Personal Savings Allowance from 6 April 2016. From this date, there will be less income tax to pay on interest from savings.

For basic rate taxpayers, the first £1,000 of savings interest will be free from income tax.

For higher rate taxpayers, the first £500 of savings interest will be free of income tax.

Currently, most savings accounts pay net interest after deducting income tax first. Once the new allowance comes in, many banks and building societies will start paying interest gross instead of net, leaving savers to declare the income for tax if appropriate.

Savers will need to declare the interest if their total income from all sources exceeds the personal allowance (currently £10,600) and if the total amount of interest exceeds the amounts specified above.