New Tax Rules for interest on savings. The introduction of the new personal savings allowance for 2016/17 will result in basic rate taxpayers being able to receive £1,000 in savings interest tax free and higher rate taxpayers £500.

Additional rate taxpayers (45%) will not receive any personal savings allowance.

At present Banks and Building Societies deduct tax from interest earned and pay the net to the taxpayer.

When the new savings allowance starts in April 2016 it is very likely tax will stop automatically being deducted by banks and therefore customers will receive the interest gross.

If tax is due on bank or building society interest, then HM Revenue and Customs have indicated they are likely to try and collect the tax due through the PAYE (Pay as you earn) system.

It is therefore important to consider equalise your savings. For example, if you are married, it may be beneficial that instead of having all your savings owned by one partner but to distribute them between both of you.

It is always important before you take any action that you obtain professional advice. If you have any questions in respect of the above, then please do not hesitate to contact our tax experts by sending an email to kevin@kwaccounting.com