The requirement to deduct tax at source on bank, building society and National Savings and Investments (NS&I) income was removed in 2016. Income from these sources is now paid gross.
For individuals, there are allowances dependant on whether you are a basic rate or higher rate taxpayer. Basic rate taxpayers can receive up to £500 in savings income before paying any tax and higher rate taxpayers can save up to £1,000 without being taxed. Additional higher rate taxpayers get no allowance.
For trusts and estates, this change has the potential for a greater amount of administration. Therefore, an interim arrangement was introduced meaning that trustees and personal representatives do not have to submit returns or make payments under information arrangements, where the only source of income is savings interest and the tax liability is below £100.
HMRC have now confirmed an extension to these arrangements to include both the 2019/20 and 2020/21 tax years and they will continue to review the longer-term position.
If you would like more information or advice on your savings, whether you’re a trustee, personal representative of a trust or estate or an individual, please contact us by email or on 01295 250401.