Gross interest and the savings nil rate band
Since 6 April 2016, the way savings income is taxed in the UK has changed. With the introduction of the savings nil rate band, most taxpayers no longer need to have tax deducted at source. Understanding gross interest and the savings nil rate band can help you manage your finances and tax obligations effectively.
What Is Gross Interest?
Gross interest is interest paid on savings without tax being deducted at source. Before April 2016, banks and building societies automatically deducted 20% basic rate tax before paying interest to savers. However, under the new system, all savings interest is now paid gross.
This means taxpayers must account for any tax due on their savings income themselves, rather than having it deducted automatically.
How Does the Savings Nil Rate Band Work?
The savings nil rate band allows:
- Basic rate taxpayers to earn up to £1,000 in savings interest tax-free.
- Higher rate taxpayers to earn up to £500 in savings interest tax-free.
- Additional rate taxpayers (earning over £125,140) do not receive a savings nil rate band.
If your total savings interest exceeds your nil rate band, the excess will be taxed at your marginal rate.
How We Can Help
Understanding gross interest and the savings nil rate band is crucial for tax planning. At Lewis Brownlee, we provide expert guidance to help you manage your savings tax efficiently. So, when you’re ready, we’re ready! Call us today to take us up on one of our free introductory meetings. We can talk you through how we can help and how we can do it – all before you commit. That’s how confident we are in our expertise and how sure we are that we can help. So, call us today on 01243 782 423 and lets see how we can partner in your success!
If you need advice on your tax position, contact us today. Visit our contact page to speak with our specialists.