From April 2016 there are new rules on how you will be taxed on interest received from your high street bank or building society account. At the moment individuals are taxed at their current rate of tax on all savings (excluding special accounts such as ISAs). Banks deduct tax at 20% before making any payments to account holders. If you are a standard rate taxpayer, then you have nothing further to pay. Higher rate taxpayers need to declare the interest on their self assessment tax return and pay additional tax.
So what changes in April 2016?
There is a new Personal Savings Allowance
• Standard rate taxpayers will be allowed to earn £1,000 interest per year before paying any tax.
• Higher rate tax payers will be allowed to earn £500 interest per year before paying any tax.
However, there is no Personal Savings Allowance for additional rate taxpayers (individuals with earnings over £150,000).
Do I need to do anything?
Taxpayers do not need to do anything, as banks and building societies will automatically start to pay interest from April without deducting any tax.