The personal savings allowance – although only a few weeks old – is already changing the savings landscape in several ways. How its impact will eventually play out is difficult to predict, but these are my observations so far.
The allowance, to recap, applied from the beginning of this tax year on April 6. It permits you to receive £1,000 savings income per year tax-free if you pay income tax at the basic, 20pc rate; or £500 if you’re a higher-rate taxpayer.
The immediate effect is that higher-paying savings accounts and current accounts become suddenly more attractive, especially in comparison to cash Isas.
It is causing savings rates to fall further
It’s hard to prove conclusively that the introduction of the personal savings allowance is the cause of further falls in savings rates. But the evidence certainly points that way. Savings rates are, alas, going through yet another period of dramatic reductions. We’ve written in these pages frequently in the past five years that rates on cash are at record lows, and it’s true yet again.
Source: Why the personal savings allowance has caused all sort of savings rates to fall further
What personal savings allowance???
