But help for some savers starts much sooner with the scrapping of the 10% starting rate of tax. So what's it all about?
Can I now get interest tax-free?
Exactly a year ago in his 2014 Budget, the Chancellor announced that the 10% starting rate of tax for savings income would be reduced to 0% from April 6, 2015.
At the same time, the government will also increase the amount of savings income that this new 0% rate applies to from £2,880 to £5,000. Until April 6, 2015 the starting rate of tax for savings remains at 10%.
To be eligible to get ALL your interest paid tax-free, your income (including some benefits such as the State pension or Jobseeker’s Allowance) must be less than £10,600 – plus the £5,000 from interest or other savings income and your total income must be less than £15,600.
It can be more than this if you received Marriage Allowance, Married Couple’s Allowance, Blind Person’s Allowance or the age related Personal Allowance. HM Revenue & Customs (HMRC) has an online calculator to help you check if you’re eligible.
Who’s eligible for a refund?
You might get a refund during the 2015/16 tax year if your total income, other than from interest or other savings income, is less than £15,600.
If you are eligible for a refund, you’ll need to complete the form R40 which you can download from gov.uk, or put the figure down on your tax return. According to HMRC, around 500,000 savers should be able to get back some of the tax they’ve paid on their savings interest.
You might get a refund during the 2015/16 tax year if your total income, other than from interest or other savings income, is less than £15,600
The government has given the following examples to help you understand whether or not you might qualify:
Example 1: Derek
From April 2015, Derek will earn £12,000 a year in his part-time job as a gardener. His tax-free personal allowance is £10,600, so he is taxed at 20% (the basic rate of income tax), on £1,400 of his wages. He then earns £50 a year in savings income (interest earned on his savings). When you add up Derek’s earnings and his savings income it is less than £15,600, so Derek is eligible to register for tax-free savings.
Example 2: Claire
From April 2015, Claire will earn £25,000 in her job as a chef. Her tax-free personal allowance is £10,600, so she is taxed at 20% on £14,400 of her wages. Claire also earns £80 a year in savings income (interest earned on her savings). However as Claire earns more than £15,600, her savings income is also taxed at 20%.
Example 3: Sharon
From April 2015, Sharon will receive £15,300 per year from her pension. Her tax-free personal allowance is £10,600, so she is taxed at 20% on £4,700. Sharon also earns £500 a year in savings income (interest on her savings), so her total income is £15,800.
Because Sharon’s total income is more than £15,600 (her personal allowance plus £5,000), she is not eligible to register for tax-free savings. However, because her non-savings income is less than £15,600 she will be able to claim back some of the tax on her savings income. She can do this by filling out an R40 form and sending it to HMRC, or through Self Assessment.
How do I register to get my interest paid tax-free?
You’ll need to contact your bank or building society on or after April 6 to tell them you’re eligible for tax-free savings. You can do this by filling in an R85 form, which your savings provider will supply you with. If you’ve previously registered to receive interest tax-free, you don’t need to do it again.
Where can I find out more?
For advice on registering to receive interest without tax being taken off, call the government Savings Helpline on 0300 200 3312. Lines are open from 8am to 8pm Monday to Friday, and from 8am to 4pm on Saturday. You can also find out more on the government website here.
Married or in a civil partnership? From April 6, 2015 you will be able to transfer some of your tax-free personal allowance across to your partner (or vice versa) so that you as a couple can reduce the amount of tax you pay. Read more and register here.
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