Do you earn less than £15,600 a year or know anyone who does? If so you – or they – will qualify for tax-free interest on your savings from early next week. The change comes into force on 6 April, the start of the new tax year – but to ensue you get your savings tax-free, you need to register with your bank or building society.
I wrote about the change a couple of weeks ago but am prompted to write about it again by reader Mrs C Hind of Shildon, Co Durham. She emailed to say: "I couldn't find any mention of this in the Budget speech, or in the newspapers day after.
"There was only a mention that, from next April, people will be able to get £1,000 of savings interest tax-free, regardless of the level of their income. Could you please clarify for your readers?"
Happy to do so. In fact the change that comes into force next month was introduced in the 2014 Budget. The Chancellor announced then that the Government is abolishing the 10 per cent starting rate of tax for savings, replacing it with a new 0 per cent rate.
It is also increasing the amount of savings to which the starting rate applies from £2,880 to £5,000. As a result, from 6 April, an estimated 1 million savers with an annual income under £15,600 will be able to get their savings interest paid completely free of tax.
Meanwhile ,a further 500,000 savers could also get back some of the tax they've paid on their savings interest.
If you're eligible for tax-free savings, you'll need to register your account with your bank or building society. Talk to your savings provider to find out how to do this, or complete an R85 form and submit this to your bank.
If you can reclaim tax you've paid on interest, you should complete form R40 or include the figure on your tax return if you have to complete one. Both forms can be downloaded from gov.uk/government/collections/income-tax-forms.
Meanwhile, the Government has set up an online calculator to help you work out if you qualify for tax-free savings or some of the tax back on your interest. You'll find it at hmrc.gov.uk/tools/r85/r85-2015.htm.
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