A little bonus for your tax return?
Back in April we highlighted that HMRC had introduced a tax-free allowance of £1,000 on savings interest.
Since many of you will be busy preparing your tax returns (you are doing that aren’t you?) it is worth reiterating some of the details of the allowance.
Basic rate taxpayers are entitled to the full £1,000 personal savings allowance, which is equivalent to the interest you would receive on £75,000 in some of the top savings accounts.
Higher rate taxpayers (earning £43,000 to £150,000) will be able to earn £500 interest with no tax, while those of you with income over £150,000 a year will be taxed in full on their interest income.
Interest income from most current and savings accounts from banks, building societies and credit unions is counted towards your allowance. Other less common sources include bonds, gilts, life annuity payments and interest distribution for some forms of investment like unit trusts.
Interest from tax free mechanisms such as ISAs and Premium Bonds isn’t included in your allowance.
The personal savings allowance is generally quite straightforward. However your tax calculations might be a little more difficult if your savings income added to non-savings income takes you into a higher rate tax band or if your partner is already on a higher rate.
If you are unsure how the personal tax allowance affects your tax position then talk to Lewis Smith & Co. today.
Lewis Smith & Co – Providing accountancy services for Kingswinford businesses for more than 30 years.