With one month to go until over a million savers no longer have to pay tax on their savings, the Chancellor has announced a new online calculator to help people work out if they are eligible.
A key part of the government’s long term economic plan is to support savers at all stages of their lives. That is why the government announced at Budget 2014 that it would abolish the 10 per cent starting rate of tax for savings, replacing it with a new 0 per cent rate.
The government is also increasing the amount of savings this starting rate applies to from £2,880 to £5,000.
From 6 April, one million savers with an annual income under £15,600 will be able to get their savings interest paid completely tax-free.
An additional 500,000 savers could also get back some of the tax they’ve paid on their savings interest.
Chancellor of the Exchequer George Osborne said:
A key part of our long term economic plan is to support savers and boost hardworking people’s financial security at all stages of life.
That’s why one month from now, the lowest earners can get their savings interest tax-free.
This will provide a massive boost for 1.5 million savers across the country, putting money in the pockets of those who need it most.
You can check if you can benefit by logging on to GOV.UK.
Checking if you are eligible is simple and straightforward through the new online calculator available online.
If eligible for tax free savings, savers will need to register their account with their bank or building society. If eligible to reclaim tax they have paid on interest, savers should complete form R40 or include the figure on their tax return.
April also sees a number of other benefits for savers come into effect - the ISA limit will increase to £15,240, making ISAs more flexible by allowing all of that money to be invested in stocks and shares or cash.
People will also be able to transfer Child Trust Funds into Junior ISAs and spouses will be able to inherit their deceased partner’s ISA benefits.
More information on the 0% savings changes is available at www.gov.uk/taxfreesavings.
At Budget 2014, the Chancellor announced that, from April 2015, the government would be abolishing the 10% starting rate of tax for savings and replacing it with a new 0% rate, to provide further support for the lowest earners.
The Chancellor also announced that it would be increasing the amount of savings income that the new 0% rate applies to, from £2,880 to £5,000.
When calculating your income, you’ll need to include any taxable wages, pensions, benefits and savings that you receive, as well as any tax-free personal allowance that you transfer or receive from a spouse or civil partner. The online calculator will help you do this.
To apply for tax free savings, savers should speak to their bank or building society about how they can register their account, or complete an R85 form and submit this to their bank.
To reclaim tax paid on saving income, savers should compete form R40 and submit this to HMRC, or include the relevant amount on their tax return if they complete one.