Budget 2015 Personal Savings Allowance

Budget 2015 Personal Savings Allowance.

The Chancellor announced in his budget speech a brand-new personal savings allowance.  This means that in addition to your ISA tax-free savings allowance you also have a brand-new personal savings allowance which will also be tax-free from April 2016.

For basic rate taxpayers the personal savings allowance will be £1000.

For higher rate taxpayers the personal savings allowance will be £500.

For additional/super taxpayers you are not entitled to any personal savings allowance.

This means that for a basic rate taxpayer they can earn up to £1000 per year in interest/income tax-free.

We simply do not understand the introduction of a personal savings allowance.  Whilst encouraging savers to save more with yet another tax-free allowance, it just adds another level of complexity.

• Will you have to nominate a bank account? No
• Will you have to declare this in your tax return? No, self-assessment returns are disappearing but being replaced by digital tax accounts.
• Is this a backdoor way to force all basic rate taxpayers to keep and complete tax records? Yes.

Despite the government suggesting that self-assessment returns will disappear.  People will be forced to keep full tax records online.  This brings into the fold all people being required to keep tax records rather than what is the case at the moment which is mainly higher rate taxpayers and people with other sources of income such as property rental income and dividend/shares income completing tax returns.

• Will banks have to change their systems? Yes, all interest will be paid gross into your bank account without of basic rate tax at source.

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