The move will mean that 95 per cent of savers will pay no tax on their savings whatsoever. However it is likely to help those with large savings deposits considerably more than those with more modest savings as no tax is payable on interest earned on the first £15,000 saved already when the cash is put into an Isa. It could render cash ISAs effectively redundant for all but the wealthiest as from now on most savings deposits will already be sheltered from tax. George Osborne said savers have paid tax already on the money when it was earned – they shouldn't have to pay it again.
Savers have lost as much as £130 billion or £5,000 per household since rates were cut, according to estimates from Hargreaves Lansdown. Financial services firm Hargreaves Lansdown analysed Bank of England data, comparing actual interest paid on cash deposits with what those payments would have been if interest rates had remained at 2008 levels. Kevin Mountford, head of banking at MoneySuperMarket, said: 'The measures announced should be applauded and it’s great to see that the Government is incentivising the nation to put more money away, especially in the current low interest rate environment where savers have been hit particularly hard.'
Source: This is Money
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