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LITRG Comments On UK's Personal Savings Allowance

Friday, October 2, 2015

The UK's new Personal Savings Allowance (PSA) should be applied automatically to savings income, rather than tax being first deducted at source, the UK's Low Incomes Tax Reform Group has said.

A PSA will be introduced with effect from April 6, 2016. It will exempt up to GBP1,000 (USD1,514) of savings income received by a basic rate (20 percent) taxpayer from tax. An exemption for savings income of up to GBP500 will be allowed for higher rate taxpayers (subject to a 40 percent income tax rate). It will not apply to savings income received by additional rate (45 percent) taxpayers.

Banks and building societies currently deduct tax from interest they pay on deposits made by individuals, partnerships, and trusts under the Tax Deduction Scheme for Interest (TDSI). This deduction arrangement will cease with effect from April 6, 2016, meaning that such interest will be paid without deduction of tax.

In its submission to a Government consultation on the proposals, LITRG welcomed the planned cessation of the TDSI. It said that the majority of savers would no longer pay income tax on their bank or building society interest and would not have to complete various forms to receive gross interest or claim a refund of overpaid tax on savings income.

LITRG noted that a potential drawback of not deducting tax at source is that some individuals will have to notify HM Revenue and Customs (HMRC) if their savings income is high enough to generate a tax liability. Nonetheless, LITRG said that many of those affected will either already be in the habit of filing a tax return or be able to deal with the tax through HMRC's proposed new digital tax accounts system or the process known as "making tax easier."

LITRG Chairman Anthony Thomas said: "Treating all savings income similarly will remove much unnecessary complexity. Otherwise there is a risk that many non-taxpayers, or savers eligible for the starting rate on savings income, will continue not to reclaim tax deducted in excess of their liability, because they perceive it as a complicated process or are simply unaware that they can get some of their overpaid tax back."

"It is essential that HMRC provide clear guidance to help individuals understand whether or not they are eligible for the PSA, what type of income is eligible for the PSA, how much of their savings income falls within the PSA and how much is liable to tax. It is also crucial that HMRC make it clear how to calculate and pay any additional tax liability and how to claim a tax refund if appropriate."

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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