A new Personal Savings Allowance, which will take 95% of taxpayers out of savings tax altogether, was introduced in the Chancellor George Osborne’s Budget statement this afternoon.
The Chancellor also introduced more flexibility for Isa savers with the introduction of a Flexible Isa.
Find out more: Budget 2015: the highlights – the key announcements
The new Personal Savings Allowance – how it works
The new Personal Savings Allowance will be introduced in April 2016.
The tax-free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings. This means no tax will paid.
Basic rate taxpayers with a total income of up to £42,700 a year will be eligible for the £1,000 tax-free savings allowance. Meanwhile higher-rate taxpayers earning between £42,701 and £150,000 will be eligible for a £500 tax-free savings allowance.
However, interest earned above these thresholds will still be taxable.
Flexible Isa announced
Until now, removing cash from an Isa has had no affect on your remaining Isa subscription limit – meaning that if you saved £10,000 into an Isa and then removed it, you would still only be able to save a further £5,000 into your Isa.
The announcement of the new ‘Flexible Isa’ removes this rule, meaning savers will be able to take money out, and put it back in later in the year, without losing any of their tax-free entitlement for that tax year. .
It will be available from this autumn.
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- How to find the best savings account – follow these four simple steps
- How to find the best cash Isa – our guide on getting the right Isa for you
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