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Personal savings allowance update

Newsletter issue - March 2016.

From 6 April 2016, the personal savings allowance (PSA) will allow basic rate taxpayers to receive up to £1,000 of savings income tax-free. For higher rate taxpayers, this limit will be £500. HMRC have published guidance setting out details of what counts as savings income and how the allowance will be calculated, including some useful examples.

Savings income includes account interest from:

  • bank and building society accounts;
  • accounts with providers like credit unions or National Savings and Investments.

It also includes:

  • interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts;
  • income from government or company bonds; and
  • most types of purchased life annuity payments.

Interest from Individual Savings Accounts (ISAs) does not count towards the PSA as it is already tax-free.

For further information on the PSA, see the GOV.UK website at here.