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View the related Tax Guidance about Personal savings allowance

Taxation of savings income

Taxation of savings incomeSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Savings income includes interest, profits from deeply discounted securities, accrued income profits and chargeable event gains.Savings income is taxed after non-savings income but before dividend income. There are four possible rates of tax applying to savings income from 2015/16 onwards: 0%; 20%; 40%; or 45%.Note that the Scottish and Welsh income tax rates only apply to the non-savings non-dividend income (commonly referred to in practice as non-savings income) of Scottish or Welsh taxpayers. As far as the savings income of Scottish and Welsh taxpayers is concerned, it is the UK tax bands and rates that apply. For the definition of Scottish and Welsh taxpayers, see the Proforma income tax calculation guidance note.When is savings income taxable?Whether savings income is taxable in the UK depends on the circumstances of the individual and whether the income is paid by a UK resident or non-resident payer.An individual who is resident and domiciled or deemed domiciled in the UK is taxable on his worldwide income (and gains) in the tax year in which these are received and should declare these on his tax return.

Estate tax returns and other procedures

Estate tax returns and other proceduresIs a tax return required?Personal representatives (PRs) have a duty to report to HMRC any untaxed income received during the period of administration and any capital gains which have arisen in that period on the sale of property forming part of the deceased’s estate. See the Income tax during administration and Capital gains tax during administration guidance notes.In accordance with the general rule under TMA 1970, s 7(3), there is no requirement for the personal representatives to notify chargeability where the only income received has been taxed at source. For tax years up to 2015/16, it was often the case that all of an estate’s income was taxed at source, since for many estates the only sources of income are interest and dividends. In that case, no return was necessary.However, with effect from 6 April 2016, tax was no longer deducted at source on bank accounts, etc and the dividend tax credit was abolished. Currently, the legislation requires that even very small amounts of investment income arising within the estate should be reported and tax paid in relation to them. PRs are not entitled to the savings nil rate band (also known as the savings allowance or personal savings allowance), whereby individuals may receive up to £1,000 of gross interest without an income tax charge, nor are they entitled to the dividend nil rate (also known as the dividend allowance) which only applies to individuals. In order to reduce the administrative burden on PRs

Utilising allowances and lower rate bands

Utilising allowances and lower rate bandsTaxpayers may wish to consider basic tax planning arrangements in order to reduce the overall income tax burden across a family by ensuring allowances and lower rate tax bands are used. This type of tax planning is often considered at the end of the tax year in preparation for the next year.This guidance note first examines the various income tax allowances and lower rate bands that should be considered and then various strategies that might be appropriate, depending on the family circumstances. It also looks at the relevant anti-avoidance provisions and actions to consider before the end of the tax year.For other commentary that is relevant to year end tax planning, see the:•Tax efficient investments and pension planning and Deferral of capital gains via reinvestment guidance notes, which consider investments that provide the taxpayer with relief from one or more taxes for the current tax year, or are exempt from income tax and / or capital gains tax•Utilising the capital gains tax annual exemption guidance note, which considers how the capital gains tax annual exempt amounts within the family might be best used•Timing of disposal for capital gains tax and 'Bed and breakfasting' with shares guidance notes, which consider the date of disposal of assets and the potential to delay the tax payment, and whether it is possible to dispose and reacquire an asset without triggering anti-avoidance rulesWhy this is importantPersonal allowanceIn general, the personal allowance (£12,570 for the 2024/25 and