April 2016 £1000 interest free

laenglish

Hi All,

I have a Santander account paying 3% AER.

At the moment you earn 3% but get taxed on it.

I have read somewhere that from April 2016 you can earn £1000 a year in interest without paying tax on it.

So, with 20k in the 123 account you would earn £600 a year in interest. Does that mean that from April 2016 you would pay no tax at all and earn the 3% tax free?

Thanks in advance for your help.

robber2

in a word ; Yes.

Story here;
http://www.thisismoney.co.uk/money/saving/article-3000721/Budget-2015-Chancellor-scraps-tax-1-000-savings-income.html

laenglish

robber2 wrote: »

in a word ; Yes.

Story here;
http://www.thisismoney.co.uk/money/saving/article-3000721/Budget-2015-Chancellor-scraps-tax-1-000-savings-income.html

That's awesome! So the 123 definitely does beat any cash ISA from April 2016? (as it stands at the moment)

laenglish

I assume the bank will still deduct the tax from your savings and then you have to declare it and claim it back? Otherwise how do they keep track of your tax free interest? Almost impossible surely?

#confused

robber2

I believe interest will be paid into the account gross and then its up to you to own up to any tax due through self assessment .

colsten

laenglish wrote: »

That's awesome! So the 123 definitely does beat any cash ISA from April 2016? (as it stands at the moment)

it does already. But there are many other accounts that beat Santander, too.

laenglish wrote: »

I assume the bank will still deduct the tax from your savings and then you have to declare it and claim it back? Otherwise how do they keep track of your tax free interest? Almost impossible surely?

The banks will stop deducting tax from 6 April onwards. It is your responsibility to tell the HMRC if you earn more than £1,000 (or £500 if HR tax payer) in interest. How exactly you will them has not yet been detailed but you won't need to know before the end of the 2016-17 tax year

NectarCollector

robber2 wrote: »

I believe interest will be paid into the account gross and then its up to you to own up to any tax due through self assessment .

That's true for this tax year (2015 - 2016) but for the next tax year (2016-2017 onwards) it will be automatic

laenglish

NectarCollector wrote: »

That's true for this tax year (2015 - 2016) but for the next tax year (2016-2017 onwards) it will be automatic

How is that calculated automatically given somebody could have as many savings accounts as they want? Or is that what is being drafted up at the moment (something to monitor it all).

DragonQ

NectarCollector wrote: »

That's true for this tax year (2015 - 2016) but for the next tax year (2016-2017 onwards) it will be automatic

What do you mean 2015-16? That's the current tax year and the £1000 allowance doesn't apply yet.

robber2

NectarCollector wrote: »

That's true for this tax year (2015 - 2016) but for the next tax year (2016-2017 onwards) it will be automatic

Doesnt seem to make sense. Do you have a source for this statement?

polymaff

robber2 wrote: »

in a word ; Yes.

In a word - MAYBE.

In 2016/17 it depends upon your marginal tax rate. If that is zero, then up to £6,000 of taxable savings interest will be taxed at zero percent. If it is basic rate, then it is up to £1,000. If it is higher rate then it is up to £500. If it is the additional rate then there is no relief.

Proof if proof were needed that there are no "in a word" answers in Mr. Osborne's world of "Tax Simplification"