article_snippet: In a major move to counter the effects of years of historically low interest rates, Chancellor announced a new personal savings allowance that will make ordinary accounts tax-free for 95 per cent of the population.
article_snippet: It means a basic rate taxpayer can earn £1,000 in savings interest without paying tax.
article_snippet: But on a standard high street savings account, interest is taxed at the saver’s normal rate of income tax.
article_snippet: income tax is automatically deducted by a bank and building society before the interest is paid, and passed directly to HM Revenue & Customs.
article_snippet: Higher earners paying 40 per cent or 45 per cent income tax are supposed to declare the interest Higher earners paying 40 per cent or 45 per cent income tax receive on a self-assessment form.
article_snippet: Lower earners who do not pay income tax can fill in a form to stop income tax being deducted.
article_snippet: These deductions mean that someone with £20,000 in a high street savings account paying 2 per cent would earn only £320 a year interest if These deductions were a basic rate taxpayer.
article_snippet: In addition to this, those with total income below £15,600 a year can apply to have those with total income below £15,600 a year savings interest paid tax-free.
article_snippet: It means a basic rate taxpayer can earn £1,000 in savings interest without paying tax, while a higher rate taxpayer will be able to earn £500 .
article_snippet: Figures from HM Revenue & Customs suggest around £1.8billion a year is received a year in savings interest tax.
article_snippet: The Chancellor introduction of a personal savings allowance means that from April 2016 those who earn below £16,800 a year won’t have to pay any tax on savings interest.
article_snippet: the point at which higher rate tax starts – will be allowed to have £1,000 in savings interest tax free.
article_snippet: Anyone earning more than this, and paying the 45 per cent tax band, has to pay tax on Anyone earning more than this, and paying the 45 per cent tax band savings interest.
article_snippet: Maike Currie, director at investment firm Fidelity, said: ‘This allowance will eradicate the double taxation most people currently experience, where Maike Currie, director at investment firm Fidelity pay tax on Maike Currie, director at investment firm Fidelity wages and tax again on the interest from Maike Currie, director at investment firm Fidelity savings.
article_snippet: ’s announcement that the first £1,000 in interest on savings will be tax-free from April 2016 as ‘fantastic news’.
article_snippet: us earned £150 on us an Isa last year, so for us to see us savings income be protected from tax really gets the thumbs up.
highlights_snippet: Basic rate taxpayer can earn £1,000 in savings interest without paying tax .
  