Banks and Building Societies will no longer deduct tax on your interest from 6 April 2016. Instead, you will receive your interest gross and not pay tax in certain circumstances:
- For basic rate tax payers the first £1,000 is tax free
- For higher rate tax payers the first £500 is tax free
- For additional rate tax payers there is no tax free allowance
Interestingly there is no ‘abatement’ of the allowance, so basically if your income is £1 over the basic rate limit, then you receive only the £500 allowance.
If you receive significant interest which has previously been taxed, then you need to be prepared to pay the tax and complete a Self Assessment.
Many clients may want to call me for a chat about this, or if you're busy and feel more comfortable, then contact us through the website here.