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Savings interest – Changes to starting rate of tax from April 2015

Posted by: edwinsmith on March 27th, 2015

Last year the 2014 budget announced changes to the starting rate of tax for low income savers. These changes will come into effect from 6 April 2015. From this date the 10 % rate of tax on savings will be abolished and replaced with a new 0% rate. There will also be an increase in the amount of savings that can benefit from new rate, from £2,880 to £5,000.

This will mean that most individuals with a total income of less than £15,600 will not pay any tax on their savings. If someone’s total income (such as wages, pension, benefits and savings income) is less than their personal allowance, plus £5,000, they will be able to register for tax-free savings at their bank or building society. If no tax is due on savings then an individual will be able to register their bank accounts for interest to be paid without tax being deducted by completing Form 85. There is also a help sheet in this link  that will help individuals work out if they qualify for 0% starting rate

Other individuals may have some of their savings interest eligible for the 0% starting rate and some taxable at 20%. In these circumstances an individual will still have some tax deducted but be will be able to reclaim some tax from HMRC using Form R40.

For further details please see Changes to starting rate of tax for savings interest.

Please contact us for further advice or assistance with forms.

Filed under: Individuals, Tax