Guidance

TDSI bulletin 45

Updated 6 April 2016

This content is obsolete from 6 April 2016.

Starting rate for savings

The introduction of a 0% starting rate for savings from 6 April 2015 means that many more savers will be eligible to register for their account’s interest to be paid without tax deducted. Deposit takers and buildings societies may therefore experience increased demand for registrations. Any savers seeking details on the changes, or whether they qualify, can see Tax on savings interest for further information.

R85 helpsheet 2015 to 2016

HM Revenue and Customs discovered an error in the R85 helpsheet. On page 2 the figure to be entered at Box 3 Married Couples Allowance is £4178 and not £9178. A revised version is now available. You must ensure any existing stocks are replaced and that any own versions are updated.

Personal Tax - a new Personal Savings Allowance

From 6 April 2016 there will be a new Personal Savings Allowance for savings income as defined under Section 18 ITA 2007 (such as bank and building society interest) received by individual basic and higher rate taxpayers. The allowance won’t be available to additional rate taxpayers or non-individuals such as trusts and estates.

Tax won’t be chargeable on up to £1,000 of a basic rate taxpayer’s total savings income each year, or up to £500 of a higher rate taxpayer’s total savings income each year.

This allowance will apply in addition to Individual Savings Account (ISA) tax advantages and income from ISA’s won’t count against the allowance.

The deduction of basic rate tax under the tax deduction scheme for interest (TDSI) will continue until the change comes into effect on 6 April 2016. The obligation of deposit takers to withhold tax under TDSI will cease on this date, but other withholding tax obligations affecting deposit takers (such as the yearly interest provisions) will be subject to review and further discussion with affected groups.

Deposit takers currently required to deduct under TDSI should continue to do so until the new Personal Savings Allowance is implemented. Similarly, deposit takers should continue to accept and process registrations from eligible savers for account interest to be paid without tax deducted. From 6 April 2016 R85 declarations will no longer be required.

In the short term it isn’t expected that the introduction of the new Personal Savings Allowance will significantly affect deposit takers’ existing information reporting obligations (such as annual reporting under Schedule 23 FA2011).

In the lead-up to these changes, the government will discuss implementation issues with the savings and investment industry, and other interested groups.

Future articles

The purpose of the tax deduction scheme for interest (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:

HM Revenue and Customs
Savings and Share Schemes S0708
Room 240
PO Box 201
Bootle
L69 9AJ

Email savings.audit@hmrc.gsi.gov.uk