Changes to the way savings are taxed, which are due to come into force this April, will be helpful for the majority of people but may prove tricky for some to get their heads around, tax experts have warned.
The Low Incomes Tax Reform Group (LITRG) of the Chartered Institute of Taxation (CIOT) cautioned late last week that those taxpayers who currently do not have an accountant might struggle to understand how the new Personal Savings Allowance, which will allow people to earn up to £1,000 in interest on their savings tax-free and will see banks stop deducting tax on interest payments at source, will require them to interact with HM Revenue & Customs (HMRC) if their circumstances change.
"If the plans go ahead unchanged, we call on HMRC to ensure very clear guidance is made available and there is sufficient publicity to draw people’s attention to the changes," said Anthony Thomas, chairman of the LITRG. "Ideally, there should be worked examples and also online calculators.
"It is also crucial that such information is available in hard copy format as well as online to help the huge numbers of digitally excluded taxpayers."
The LITRG also warns that the new rules could cause unfairness for some – for example, somebody could find the amount they are allowed to earn in interest tax free be slashed in half if a payrise takes them into the higher rate income tax bracket by just £1.
Thomas added: "People should keep an eye on their level of savings income to ensure they do not stray into a different taxable band. They should also continually check data received from HMRC."
According to HMRC, once the changes are in force, the majority of people will no longer have to pay tax on their savings interest income.