Personal Savings Allowance

[BJS]

t received a letter from my bank saying from 6th April the tax from my account interest would no longer be deducted but would be accountable in this PSA with a allowance of £1000 as being a pensioner my income I am on the basic rate of tax. Where did this scheme originate from as I had never heard of it.

[Fibonacci]

https://www.gov.uk/government/publications/personal-savings-allowance-factsheet

[Fibonacci]

More info here
http://www.moneysavingexpert.com/savings/personal-savings-allowance

[Gizmonster]

Good links from Fibonacci :)

In a nutshell, if you're a basic rate tax payer, you can earn £1000 interest on savings and pay no tax on it.
For most people, this will mean paying no tax at all, 'cos f you can get an account that will pay say 2% interest (wishful thinking!!), you'll need savings of £50 000 to earn £1000 interest .... so if you've savings of less than £50 000, you'll no longer pay tax on your interest :)

[fiction-factory]

Yes, I've been looking forward to it since it was announced in March 2015 in the Budget. You may want to tune into Martin Lewis's programmes on radio/TV or look at the Money Saving Expert site as he's been talking about this for ages and has other money saving tips and advice about financial changes that are on their way

[Hopkirk]

It makes ISA's a bit pointless for most of us.

[Fibonacci]

Martin Lewis seems to think cash ISAs still have a role to play
http://www.moneysavingexpert.com/savings/personal-savings-allowance

[fiction-factory]

Yes I think they've been pointless for a while in the main for those where the interest rates have been under 1.5% net when you can get 3% gross and sometimes more on some current accounts

[hc4361]

If you are a high rate tax payer then ISAs still make sense, especially if you have amassed many years of savings in your ISA

[Hopkirk]

I fail on both of those, HC

[ubasses]

Lots of links given re the tax limit.
Gizmonster if you are looking for 2% or more, Sensible Savings at Asset bank are offering 2% on a one year fixed bond or more if you can leave it longer. They are a Challenger Bank, registered and covered by the FSCS.
Yes, there will always be a place for the ISA, you never know what future Governments will do and you could lose out long term if you do not utilise ISA limits. Obviously it all depends on the level of savings you have.

[DocHH]

ISAs are not just limited to cash, there are stock/share ISAs too, and there are significant benefits in investing those, viz no capital gains tax.

[fiction-factory]

I agree it's probably worth keeping older ones as they may come back into their own again (although i doubt it) but I don't see little point in putting new money in at 1-2% in the 2016/17 tax year until you have exhausted all your tax free options at 3-6% from 5-6%regular savers, Santander123, lloyds 5% etc within the PSA

[New Judge]

The annual Capital Gains Tax allowance is £11,100.

For Basic Rate taxpayers there is no real advantage to holding shares in an ISA. Unless a saver has built up a large sum in shares sheltered in an ISA he is unlikely to make Capital Gains in excess of the allowance.

[DocHH]

NJ I would agree with that, but cash in my opinion is far from the best way to save for the long term future. Even when I was a basic rate tax payer I always sought to optimise my "tax-efficient" savings. Pension fund saving first, then PEPs once they were introduced. Consequently it has been quite easy to build a substantial equity based portfolio, where any capital gain has not only exceeded the taxable capital gain limits each year but is also now generating a substantial tax free income.

[New Judge]

Agreed, Doc. In the long term a number of years of ISA protection is worthwhile.

[DocHH]

NJ, as part of the reforms on tax on savings a new tax free allowance of £5,000.00 on dividend income has been proposed. Do you think that this will lead to dividends being paid without deduction of ACT or that it will need to be reclaimed up to that level through Self-Assessment? Either way it leads to a further complication of our already complex tax system.

I also seem to remember that some time ago a previous Chancellor, Gordon Brown I think, removed the ability to reclaim the ACT on dividends from shares held within an ISA/PEP. This now seems to me to be creating an anomoly, viz dividend income from shares in an ISA are de facto taxable, but dividend income up to £5,000.00 generated by shares held outside an ISA is not subject to ACT.

I'd appreciate your opinion.