Tax saving for 1m pensioners

The Budget contained a surprise give-away for up to a million pensioners on low incomes.

The savings tax rate that applies to the first slice of investment income will be cut to zero from April 2015 and apply to up to £5,000 of income. This band comes on top of the personal allowance, so someone with a pension of £10,500 (equal to the personal allowance) could have up to £5,000 in savings income and pay no tax on it. However, if they have any non savings income above the personal allowance then to the extent of it the £5,000 tax free “allowance” will be reduced.