AS OF April 2015, the ten per cent starting rate of tax for savings income has been simplified.
Savers will now pay no income tax on their savings where their total income is below £15,600.
Where the saver’s total income exceeds £15,600 but the amount from non-savings income is less than this figure, part of their savings income will be tax free.
A new £1,000 personal savings allowance will be introduced from April 2016 which is estimated to abolish tax on savings interest for up to 95 per cent of people.
For basic-rate taxpayers, the first £1,000 of savings interest will be tax free which decreases to £500 for higher-rate taxpayers.
If you are entitled to receive all of your savings income tax free, you should contact your bank to ensure that you receive your interest without the deduction of tax.
If you are entitled to only part of your savings tax free, you can reclaim the overpayment of tax using HMRC form R40.
There have also been recent changes to Individual Savings Accounts (ISAs). The current allowance for ISA additions in the 2015/16 tax year is £15,240.
Currently any money withdrawn from an ISA cannot be replaced if the annual allowance has been used up, but this is set to change.
From autumn 2015, new rules will be introduced to make ISAs more flexible by enabling savers to take money out and put it back in without using their annual allowance provided that both transactions are in the same tax year.
An important change further extending flexibility is that ISAs can now be passed to a spouse on death without losing the tax-free wrapper. Before this the tax-free status of the ISA was lost on death.
Help to Buy ISAs will be available from autumn 2015 and will be available to open for four years. They will be available for first-time buyers to build a deposit.
The maximum value of the property will be set at £250,000 or £450,000 in London.
Savers can open the account with up to £1,000 and can contribute up to £200 per month.
The government will contribute 25 per cent of the total value of the account at the time the property is purchased up to a maximum of £3,000 per person. It will not be possible, however, to contribute to both a Cash ISA and Help to Buy ISA in the same tax year.
By Ashley Partridge
Trusts department, 01243 813521
George Ide, LLP
Solicitors of Chichester and Bognor Regis
Telephone 01243 786668