Starting rate limit for savings for tax year 2018-19

Finance (No. 2) Bill – in a Public Bill Committee am 10:15 am ar 9 Ionawr 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Clause 5 maintains the starting rate limit for savings income at its current level of £5,000 for 2018-19. As members of the Committee will be aware, the starting rate for savings applies to the taxable savings income of individuals with low earned incomes. The Government made significant changes to the starting rate for savings in 2015, lowering the rate from 10% to 0%, as well as extending the band to which it applies from £2,800 to £5,000. This welcome reform has done much to support savers on low incomes by reducing the tax they pay on the income they receive from their savings. Since then, savers have been further supported by the introduction of the personal savings allowance, which offers up to £1,000 of tax-free savings income.

The changes made by clause 5 will maintain the starting rate limit for savings at its current level of £5,000 for 2018-19 tax year. This change is being made to reflect the significant reforms made to support savers over the last couple of years, in addition to the substantial increases in the personal allowance. Most notably, in April 2016, the Government introduced the personal savings allowance, which will remove 18 million taxpayers from paying tax on their savings income in 2018-19. In April 2017, the annual individual savings account allowance increased by the largest ever amount, to £20,000.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader, Shadow SNP Spokesperson (Economy)

It is admirable that the Government are making changes to make it easier for people to save. Would the Minster let us know how many people have begun saving as a result, and how much saving has increased for families? If there are now so many people who are employed, and so many who are using the personal allowance, surely they have loads of extra cash that they are now saving?

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

The hon. Lady is right: it is certainly the case that the more people there are in work, the better they are supported; and the less tax to which they are subject, the more disposable income they will have with which to save. That is self-evident, which is why it is this Government’s mission to keep economic growth going, employment high, and unemployment and taxes low to facilitate exactly the point that the hon. Lady is making.

Taken together, these reforms mean that today, 98% of adults in the UK pay no savings tax. This Government remain committed to supporting savers of all incomes, and at all stages of life. These reforms, coupled with the significant increases to the starting limit in 2015, mean that we do not believe that a further increase in the starting rate for savings is necessary. I therefore commend the clause to the Committee.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill

Clause 6