Bank interest changes from 6th April 2016

At present basic rate tax is usually deducted at source on interest received, however this is changing from 6th April 2016 onwards.

In future interest will be paid with no tax deduction, instead people may be entitled to a tax-free savings allowance of interest depending on their tax band:

Basic rate taxpayer – £1,000 tax free savings allowance

Higher rate taxpayer – £500 tax free savings allowance

Additional rate taxpayer – no tax free savings allowance

It is important to beware if you are close to the next tax band – the savings allowance is taken after total gross income is calculated, so you could find that you actually have a lower savings allowance than you may have thought.