Budget 2014 – The starting rate for savings

Low income individuals who have taxable savings income, such as bank or building society interest, currently pay income tax at 10% on such income up to the starting rate limit of £2,790.

The 10% rate only applies if the £2,790 limit has not been used against other taxable non-savings income such as pensions.

Dividend income does not impact the availability of the starting rate.

From 6 April 2015 the starting rate limit will be increased to £5,000, and the starting rate of tax will be reduced from 10% to 0%.

These provisions will ensure that savers on low incomes will not suffer income tax on their savings income.