From 6 April 2016 all interest paid on your savings will be paid gross, prior to this most people received their interest net of basic rate income tax.
At the same time a new personal saving allowance has been introduced of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
The aim here being to ensure that taxpayers receiving small amounts of interest each year will not need to file a tax return purely as their interest is now received gross.
Running alongside this we also have the starting rate for savings. This enables certain taxpayers to receive up to £5,000 of interest income tax free. This allowance is only available if your non-savings income (ignoring dividends) is below or within your personal allowance of £11,000 plus £5,000.
Initial indications are that these changes have caused some confusion. The interaction of the different allowances is complex and communication to investors has been poor. If you have any questions or would like more information please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.