Banks, building societies and National Savings & Investments stopped taxing interest at source on 6th April, potentially complicating the administration of smaller estates and trusts.
Under the old tax deduction scheme for Interest, representatives of estates and trusts, as well as individual taxpayers, receive bank or building society interest with tax already deducted. But on 6 April, in tandem with the introduction of a new £1,000 personal savings allowance for individuals’ savings income, this will end and interest will be paid gross of tax, as it is to companies.
Because of these changes, says HM Revenue & Customs, some trustees or administrators of estates that do not currently complete a tax return to may incur a new obligation to report to HM Revenue & Customs untaxed interest.
As a transitional measure, HM Revenue & Customs has announced that personal representatives will not need to notify it of savings interest income for the tax year 2016/17, if that is the estate’s only source of income and the tax liability is under £100 which is very helpful. The relief applies to trustee returns, returns for estates in administration, and payments made under informal arrangements.
The reporting arrangements for subsequent tax years have not yet been decided.