Banks have cut interest rates to such an extent that the Government’s new tax breaks have been “rendered practically worthless”, This is Money reports.
New rules, introduced by the Government on 6 April, allowed savers to earn up to £1,000 (or £500 for higher-rate tax payers) before paying tax on the interest gained.
However, cuts by the banks, triggered by the Bank of England (BoE) base rate cut, may leave savers with almost no interest to save on anyway.
Some banks have even warned that they may drop rates to as low as 0.05 per cent this autumn.
Using this figure, customers could earn just £2.50 a year on an average £5,000 savings account, meaning the new tax breaks could save consumers as little as 50p each year.
Many of the big banks had cut interest rates by around 0.25 per cent, similar to the official BoE base rate cut earlier this month.
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