From 2016, a basic rate taxpayer could have more than £70,000 before paying tax on the interest

19th March 2015

img

The Chancellor’s focus on savers continues and this time it covers everyone writes Mindful Money columnist and founder of Savings Champion Anna Bowes

We welcome any changes that bring some respite to savers and at first glance these will help the great majority of UK savers to benefit from tax free income. Although it’s a small change for larger savers, it could be crucial for those relying on their savings to provide an income.

From 2016, assuming the announced changes become law, basic rate tax paying savers looking at the current best easy access rate, should be able to deposit up to £71,429 before paying tax on the interest. For those earning a higher interest rate, as a result of locking in to the best 5 year fixed rate, the maximum would be £33,113 of savings before tax is payable. As always it is important to be aware of the financial services compensation scheme (FSCS) limits, which currently cover £85,000 of savings per person, per banking licence, so this money is not only tax free, it’s secure.

With CPI at 0.30% and the FSCS fully underwriting the security of savers capital if held in the best rates, as the figures above demonstrate, saving has finally become an attractive proposition.

Nothing beats a traditional bank and building society savings account for a low risk, secure home for your savings, especially when saving for things like a deposit on a home and now the Chancellor is adding £50 to every £200 saved for first time buyers.

The key factor in today’s announcements however is do these radical changes to savings further complicate the market and increase the need for savers to get advice on their cash?

Leave a Reply

Your email address will not be published. Required fields are marked *