Savers have been handed some much-needed support at the start of the new tax year, but the number of government initiatives could actually be discouraging people from saving their cash.
The Personal Savings Allowance (PSA) was announced in March’s Budget and took effect at the start of the 2016/17 tax year. Under the new rules most people will be able to earn tax-free interest on their savings. Previously all cash which was not placed in an Individual Savings Account (ISA) was subject to tax at the same level as an individual’s income.
Now anyone with taxable income of less than £17,000 will not pay any tax on their savings interest, regardless of the type of account it is housed in. Those with income of up to £43,000 can earn £1,000 in interest from their savings without being taxed while higher rate taxpayers earning between £43,001 and £150,000 will recieve a PSA of £500.
Anyone with a taxable income of more than £150,000 will continue to be taxed on all savings held outside of ISAs.
Despite the boost for long-suffering savers, the introduction of the PSA has resulted in further confusion over the various products and schemes on offer. A
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