New rules for the payment of tax on savings interest will come into force from 6th April 2015.
The changes are expected to benefit one million savers who have an income below a specified level. Until the start of the new tax year, savers pay tax at the rate of 10 per cent on interest from their
savings, for the initial £2,880. From April, it won’t be chargeable on savings interest up to £5,000, as long as the total income is below £15,600. If this is the case, savers are being urged by the government and HMRC to register with their building society or bank as a non-taxpayer. This is done by completing a form R85, but a separate form has to be completed for each savings account held by the taxpayer.
To calculate whether or not you will be eligible to register as a non-taxpayer, add up all your income other than interest from any savings accounts. If the total amount of income, without savings interest, is below the personal allowances level of £10,600 and interest from savings is below the amount of £5,000, you will be eligible to register with your bank or building society.
Figures from the government indicate that one million people with savings will be able to receive interest without paying tax, if their income is below the £15,600 threshold. Another half a million people with savings are predicted to get some of their interest paid tax free. If someone has paid tax on interest received from savings and they have total non-savings income below £15,600, they should request and complete a form R40 and submit to HMRC for a refund of tax.
How to calculate whether or not you are eligible
Initially, add up all income other than interest from savings. Then, add up interest received from savings. If the total amount is less than £15,600 – which is the combination of personal allowance £10,600 and the £5,000 interest limit – you are eligible to register to receive savings interest tax free.
If your income, other than bank interest, is more than £10,600 but less than £15,600, you will pay tax on all your income but may be entitled to a refund of some of the tax paid on bank interest. If your total income is more than £15,600, you will pay tax on all your savings interest.
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