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Income Tax Update – Personal Savings Allowances
From 6th April 2016 the introduction of the Personal Savings Allowance will result in a change in the automatic basic rate Income Tax deduction on interest paid by banks, building societies and NS&I. Currently these institutions will automatically deduct this basic rate tax from payments before they are made to customers, which system had a secondary benefit to Personal Representatives and Trustees of interest in possession of Trusts who could avoid the administrative burden of Tax Returns where this deduction covered their obligation under the Estate or Trust. However, it will now be essential to gather and return information about all taxable income received in these cases in order for Personal Representatives and Trustees to meet their obligations. From April 2016, Personal Representatives will need to file returns, pay tax, and beneficiaries shall effectively receive income from the estate net of basic rate tax. HMRC have confirmed in their April 2016 Trust and Estates News letter that:-
“Following feedback from customers and stakeholders we are putting in place interim arrangements regarding Trustee Returns, Returns for estates in administration and payments made under informal arrangements. This means that the for the tax year 2016/2017 we will not require notification from Trustees or Personal Representatives dealing with estates in administration where the only source of income is Savings Interest and the tax liability is below £100.00. We are currently reviewing the situation longer term and will notify key customers prior to tax year 2017/2018 as to the new arrangements.”
If you would like advice on tax issues relating to estates, or any other tax matters, please do not hesitate to contact Lucy Thomas at our Cockfosters office or Judith Bleetman at our Church Hill Road office.