From April 2016, the government will introduce an allowance to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. The government said that savings income that remains taxable will be collected through the PAYE coding system. The requirement for banks to deduct 20% automatically at source is to be removed so savers who have income exceeding the new personal savings allowance will need to make sure that their savings income is instead coded out against their PAYE source(s) assuming they’re employed or in receipt of pension income.
The CIOT, however, said that while it agrees with the underlying point that the current system of savings taxation in the UK is beset by complexity, the proposal to introduce an allowance of £1,000 or £500 in addition to the starting rate band for savings income is ‘hardly straightforward’. Patrick Stevens, the CIOT’s tax policy director, said: ‘There will be some devil in the detail to ensure that the switching of obligation from deduction at source to HMRC via the coding notice goes smoothly and that those on the margins of the two rates of allowance understand their position.’
From April 2016, the government will introduce an allowance to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. The government said that savings income that remains taxable will be collected through the PAYE coding system. The requirement for banks to deduct 20% automatically at source is to be removed so savers who have income exceeding the new personal savings allowance will need to make sure that their savings income is instead coded out against their PAYE source(s) assuming they’re employed or in receipt of pension income.
The CIOT, however, said that while it agrees with the underlying point that the current system of savings taxation in the UK is beset by complexity, the proposal to introduce an allowance of £1,000 or £500 in addition to the starting rate band for savings income is ‘hardly straightforward’. Patrick Stevens, the CIOT’s tax policy director, said: ‘There will be some devil in the detail to ensure that the switching of obligation from deduction at source to HMRC via the coding notice goes smoothly and that those on the margins of the two rates of allowance understand their position.’
