Tax  

Treasury clarifies products included in savings allowance

Treasury clarifies products included in savings allowance

HM Treasury has clarified which products count towards the personal savings allowance.

It had already said that Isas do not because they are already tax free but yesterday (28 September) it issued a list of other products which are treated the same way.

These include interest from National Savings & Investments tax-free products, such as Fixed Interest Savings Certificates and Index-linked Savings Certificates.

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Prizes won from Premium Bonds also do not count towards the personal savings allowance since they are already tax-free.

However savings income from accounts with NS&I and other providers like credit unions, banks and building societies, do count.

The personal savings allowance was introduced on 6 April, meaning basic rate taxpayers with an income up to £43,000 will be able to earn up to £1,000 interest without paying any tax on it.

The figure reduces to £500 for higher-rate taxpayers, while those with incomes of more than £150,000 are not eligible at all.

The allowance also covers interest distributions – but not dividend distributions – from authorised unit trusts, open-ended investment companies and investment trusts, as well as income from government or company bonds and most types of purchased life annuity payments.