UK Government To Give Elderly Savers Tax Break

by Robert Lee, Tax-News.com, London

10 February 2009

In light of the recent drop in UK interest rates to 1%, the country's Chancellor Alistair Darling has announced that he is set to offer tax concessions to pensioners who rely on the interest gained from personal savings.

According to the Chancellor, the UK Treasury is now giving serious consideration to the idea of raising the tax threshold for individuals over 65, as well as overhauling and updating the way in which tax-free savings accounts (ISAs) are structured.

A quarter of all the UK savings accounts are held by those over the age of 55, with many of these individuals relying on the income they provide. Under the current regulations, the first GBP9,000 is tax-free.

In January of this year, leader of the Conservative party, David Cameron, highlighted the need for a greater tax allowance for pensioners when he unveiled a GBP4.1bn plan to reduce the amount of tax paid by savers and pensioners on their interest income.

The centrepiece of the proposals, announced by Cameron in a speech on January 7, was a plan to abolish income tax on savings for everyone on the basic 20% rate of tax. The plan also called for an increase in the tax allowance for pensioners up to the age of 75 by GBP2,000 to GBP11,490 (based on allowances for the 2009/10 tax year). The over 75s would also see their tax allowance rise by GBP2,000, to GBP11,640.

Mr Darling now also proposess increasing the tax allowances for over 75s by GBP2,000, which, if implemented, is expected to save pensioners around GBP400 a year on average.

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