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2016 no tax on first £1000 interest earned

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  • molerat
    molerat Posts: 32,073 Forumite
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    You also have the current up to £5000 tax free interest to take into account
  • steve65e
    steve65e Posts: 154 Forumite
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    Thanks Archie Bald, that's certainly what I am hoping.

    Have you seen this in writing anywhere or just applying logic? All I could find was an MSE article saying that the savings interest might be completely ring fenced from the personal allowance but the details weren't out yet. (sorry, can't find the link at the moment).
  • steve65e
    steve65e Posts: 154 Forumite
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    molerat wrote: »
    You also have the current up to £5000 tax free interest to take into account

    No, I'm pretty sure thats going, to be replaced by the new £1k allowance.
  • chris_m
    chris_m Posts: 8,250 Forumite
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    It's not totally clear - all I've seen for sure is two unrelated documents on the gov.uk site referring to the current situation - if your total income (including interest) is below the personal allowance plus £5K then there's no tax on the interest - and the new Personal Savings allowance - no tax on the first £1K of interest for basic rate taxpayers, £500 for higher rate taxpayers. However, that second document did say about "going further" than the arrangements for this year.

    I "think" that from next April, if your total income (including interest) is below the personal allowance plus £5K then there's no tax on the interest.
    If your income exceeds that, then there's no tax on the first £1K if interest.

    If anyone knows better for definite, I'd love to hear - coz next year I'll fall into the category that get less than £15.6K but will likely be getting more than £1K interest as part of that.
  • redux
    redux Posts: 22,976 Forumite
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    The trouble with modern Budget speech practice is some of it is becoming more like a series of coming soon adverts, and quite a lot of the detail of when things will happen is announced separately, possibly some time later.
  • steve65e
    steve65e Posts: 154 Forumite
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    http://www.moneysavingexpert.com/savings/tax-free-savings

    "Then, from next April, the personal savings allowance will supersede these tax-free savings rules, BUT anyone who still qualifies then under these tax-free savings rules will get a higher £2,000 personal savings allowance for that year, instead of the £1,000 that will apply for other basic-rate taxpayers."

    Implies, but doesn't quite state, that the £5k savings band is going
  • steve65e
    steve65e Posts: 154 Forumite
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    More here...

    http://http://www.moneysavingexpert.com/savings/personal-savings-allowance

    "This new personal savings allowance is a radical departure for savings, creating it as a new tax bracket in its own right - within the income tax system."

    BUT

    "However, under the new system we are still awaiting confirmation of whether the personal savings allowance is separate,"

    ??????
  • westy22
    westy22 Posts: 1,105 Forumite
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    ChiefGrasscutter wrote: »
    Sounds like a lot more people will be doing self assessment forms.

    Alternatively HMG will be setting up back office connections with savings providers to automatically marry up taxpayers details at HMRC with the sum total interest they get from their various sources and then adjust their PAYE code to pay the tax that way.

    That is what, in theory, is supposed to happen when the new Personal Tax Accounts are introduced. All earnings, pensions, savings interest etc will be automatically pre-populated into the account.

    If, of course, they can ever get the IT to work!
    Old dog but always delighted to learn new tricks!
  • chris_m
    chris_m Posts: 8,250 Forumite
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    steve65e wrote: »
    http://www.moneysavingexpert.com/savings/tax-free-savings

    "Then, from next April, the personal savings allowance will supersede these tax-free savings rules, BUT anyone who still qualifies then under these tax-free savings rules will get a higher £2,000 personal savings allowance for that year, instead of the £1,000 that will apply for other basic-rate taxpayers."
    Implies, but doesn't quite state, that the £5k savings band is going

    If that is the case, it does seem somewhat unfair for those who qualified this year (not me, so no sour grapes here) to be told this year "you earn under £10.6K so can get up to £5K interest tax free" and then to tell, them "but next year you can only get £2K interest tax free, oh and that'll be halved again the year after."
  • colsten
    colsten Posts: 17,597 Forumite
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    chris_m wrote: »
    If that is the case, it does seem somewhat unfair for those who qualified this year (not me, so no sour grapes here) to be told this year "you earn under £10.6K so can get up to £5K interest tax free" and then to tell, them "but next year you can only get £2K interest tax free, oh and that'll be halved again the year after."

    I have no idea where the £2K comes from, there is nothing I have seen in any HMRC document about it.

    Here is what I understand

    2015-16
    • everyone has a personal allowance
    • people on low income also have a "starting rate" for savings income. Where, for 2015-16
      1. low income is defined as personal allowance plus £5,000, i.e. £15,600
      2. the starting rate is 0%

    2016-17
    • everyone has a personal allowance
    • people on low income also have a "starting rate" for savings income. Where, for 2016-17
      1. low income is defined as personal allowance plus £5,000, i.e. £15,800
      2. the starting rate is 0%
    • a new savings tax allowance will apply as follows:
      1. £1,000 for BR tax payers
      2. £500 for HR tax payers
      3. none for additional rate tax payers


    My understanding is supported by this government document in which it says
    That means from April 2016, you won’t have to pay tax on your interest if your taxable income is less than £16,800.

    There is absolutely nothing that suggests the starting tax rate would get abolished in 2016-17.
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