TDSI bulletin 42
Updated 6 April 2016
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This content is obsolete from 6 April 2016.
1. Budget 2014 announcement
1.1 Starting rate for savings from 6 April 2015
The Chancellor announced at Budget 2014 that from 6 April 2015 the starting rate of tax for savings income (such as bank or building society interest) will be reduced from 10% to nil, and the maximum amount of taxable savings income that can be eligible for this starting rate will be increased from £2,880 to £5,000.
One of the effects of this change, when combined with changes to the tax-free personal allowance, is that savers will not be liable for tax on any interest they receive if their total taxable income for tax year 2015 to 2016 is less than £15,500.
This figure will be £15,660 for people born before 6 April 1938 and may be higher for people entitled to the Married Couple’s Allowance (for those born before 6 April 1935) and people entitled to the Blind Person’s Allowance. In addition, a different figure may be relevant where married couples and civil partners transfer part of their personal allowance. Further details of how these will affect eligibility for the starting rate will be published nearer 6 April 2015, when this change comes into effect.
1.2 Registering for interest payments without tax deducted (using Form R85) from 6 April 2015
The eligibility rules for completing a form R85 will also change from 6 April 2015, to enable more savers to register to receive interest payments without tax deducted.
Currently an R85 can be completed by a saver whose total taxable income for the tax year will be below their tax-free personal allowance. From 6 April 2015, a saver who is unlikely to be liable to tax on any of their savings income in the tax year can complete an R85 and register to receive interest without tax deducted, even if they pay tax on other (non-savings) income.
In practice, this means if a saver’s total taxable income will be below the total of their tax-free personal allowance plus the £5,000 starting rate limit for savings, from 6 April 2015 they can register to have interest paid on their accounts without tax deducted, using form R85.
HM Revenue and Customs will work with account providers and interested groups to communicate the new rules to affected savers in good time for the change on 6 April 2015.
2. Future articles
The purpose of the TDSI bulletins is to clarify areas of the TDSI guidance notes. If you feel that any aspect of the guidance is unclear you should contact Savings Schemes Office at:
HMRC Savings and Share Schemes SO708
Room 100
Po Box 201
Bootle
L69 9AJ