9 April 2018

Tax on Savings and Investments - April 2018 Update

Various changes have taken place recently, some of which may require action from the saver / investor.

From April 2016 interest on savings was paid gross (that means Income Tax was not deducted). You are still responsible for paying any tax due, though.

To help with that, a Personal Savings Allowance was introduced. Within that you don't have to pay tax, but if any interest is received above it you do. It is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers (2017-18 and 2018-19). Most people don't earn that much interest these days, but if you do you need to tell the tax man.

Also in April 2016 a tax-free Dividend Allowance of £5,000 was introduced to replace the "tax credit" system that previously applied. If you received more than that in dividends during 2017-18 you should complete a self-assessment tax return.

The Dividend Allowance falls to £2,000 from April 2018.

From April 2017 "collective investments" (generally meaning investment funds) joined the  "gross" party and now pay dividends and interest gross. Information from the investment provider (after April 2018) will enable you to see if tax is due.

Capital Gains Tax applies to the growth of certain (non-property) investments when you sell. There have been no significant changes recently - a slightly increased allowance continues to be available, while the rate itself is a manageable 10% for gains within the basic rate band, or 20% above that.

All of the above can be bypassed if your savings or investments are held within an ISA. You don't need to declare interest or capital gains on a tax return, even if you are completing one for other reasons.

The Inheritance Tax nil rate band continues to be £325,000 although the Residence Nil Rate Band rises to £125,000 from April 2018.

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