A million people are being advised to register so that they donít lose any money to tax on their savings interest. From the 6 April, the rules are changing so that if your annual income is under £15,600, you will be in line for tax-free savings.
In order to register, the saver must get hold of an R85 form for each of their taxable accounts and fill out the necessary details. Such forms are available at building societies and banks. A customer is able to verify if they qualify for this scheme at the HMRC website.
The change will see the negation of the original regulation that a saver must pay 10% on their savings interest of their first £2,880, with the qualification that your annual income falls below the required amount. Under the new rules, there will be a zero-tax band on the savings interest of their first £5,000.
Those looking to qualify for the tax-free savings interest must add up their entire taxable income with the proviso that they do not add in the interest from their savings account. Therefore, this includes benefits, all income from stock market investing as well as pensions.
Furthermore, there could be as many as 500,000 people eligible to reclaim some of the tax they did lose on savings interest. To qualify for this their non-savings income total must come to less that £15,600. If entitled to this benefit, it is necessary to full out an R40 form or put the figure down as part of their total tax return form.
The Chancellor of the Exchequer, George Osborne, commented on the rule change: ìA key part of our long-term economic plan is to support savers and boost hardworking peopleís financial security at all stages of life. Thatís why one month from now, the lowest earners can get their savings interest tax-free. This will provide a massive boost for 1.5 million savers across the country, putting money in the pockets of those who need it most.î
A number of examples have been offered by the government to further elucidate the scheme.
Derek (part-time gardener): Derek takes in £12,000 a year and £10,500 of this a personal allowance which comes tax free. He therefore is charged 20% tax (basic percentage income tax) on the remaining £1,500. Additionally, he take in £400 per annum in interest through savings. This all comes to less than the stipulated £15,500 and thus he qualifies to register for tax-free savings interest.
Claire (Chef): Claire takes in £25,000 per annum and her personal allowance that is tax-free is £10,600. Therefore she receives 20% tax on £14,400 of her income and gets £80 per annum in savings. Because she earns over the stipulated £15,600 she does not qualify for the scheme.