In the 2015 budget, the Government announced, from 6 April 2016 a new tax-free Personal Savings Allowance would be introduced.
What are the changes?
From 6 April 2016, if you’re a basic rate taxpayer you’ll be able to earn up to £1,000 in savings income tax-free. Higher rate taxpayers will be able to earn up to £500. This is called the Personal Savings Allowance. Please note that Additional rate (45%) tax payers don’t qualify for the Personal Savings Allowance.
- Most people will no longer pay tax on savings interest
- Banks including State Bank of India UK will stop deducting tax from your account interest
For more information about the changes, please visit https://www.gov.uk/government/publications/personal-savings-allowance-factsheet
What do you need to do to avail this allowance?
You don’t need to do anything to claim your Personal Savings Allowance.
If you’re a basic rate taxpayer and have savings (income or interest) of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.
HMRC will normally collect the tax by changing your tax code. Banks, including State Bank of India UK, will give HMRC the information they need to do this.
If you fill in a Self-Assessment tax return, you should carry on doing this as normal.
What counts as savings income?
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
- most types of purchased life annuity payments
Interest from Individual Savings Accounts (ISAs) doesn’t count towards your Personal Savings Allowance because it is already tax-free.
Please remember the above is a guide only and State Bank of India does not provide tax advice. Tax rules can change in the future and the effects of tax rules will depend on your individual circumstances. Please speak to your Independent Financial Advisor or Tax Advisor for more details and specific advice.
Are there any changes to Terms & Conditions?
We’ve changed your Terms and Conditions to reflect this change.
Changes to General Terms & Conditions
From 6 April 2016, interest on your deposit accounts is paid without deduction of income tax and that there is no longer a requirement for you to register receive gross interest.
||New (Effective from April 6, 2016)
||If you are an individual, you may be able to register with us to receive interest gross. Otherwise interest will be paid net of income tax at the prescribed rate.
||All the interest we pay you on or after 6 April 2016 will be without any tax deducted i.e. paid at gross rate.
If the total amount of interest you receive exceeds any Personal Savings Allowance to which you are entitled, you may have to pay tax at the applicable rate. It is your responsibility to ensure that this tax is paid. This would need to be paid directly to HM Revenue & Customs (‘HMRC’). For more information, please visit gov.uk.
||We are not able to treat the tax status of each of the joint Account holders differently for the purposes of applying interest, so unless you are all eligible to to receive interest gross we will pay interest net of tax. For further details please see section 8.7 below.
||For joint Account holders, the interest is paid by us at gross rate without deducting tax. Please refer section 2.3 above for further details.
||We will pay you interest after deduction of tax at the applicable rate. If you are eligible and have completed, signed and returned to us the correct form from HM Revenue and Customs then we will pay you interest gross. Please note if you are joint Account holders then we will always pay interest net of tax unless all of you are eligible for interest gross (for which you would each have to provide a form as outlined above).
||All the interest we pay you on or after 6 April 2016 will be without any tax deducted i.e. paid at gross rate. For further details please see section 2.3 above.
Changes to Individual Product Terms & Conditions
||New (Effective from April 6, 2016)
|We pay interest after income tax has been deducted at the legal rate (currently 20%).
||All the interest we pay you, on or after 6 April 2016 will be without any tax deducted i.e. paid at gross rate. If the total amount of interest you receive exceeds any Personal Savings Allowance to which you are entitled, it is your responsibility to ensure this tax is paid.