Sir John Major suggests give savers £5,000 tax break

Appearing on the BBC’s Andrew Marr program, Sir John Major suggested that in a bid to help savers who are suffering from the large drops in interest rates the first £5,000 of income from their savings should be exempt from tax each year.

Sir John said ‘those who have been prudent and saved for their retirement are finding the amount they’re earning in interest on their savings has dropped dramatically because we’re in economic difficulties.’

He went on to say ’What I would suggest we do is exempt from tax the first £5,000 worth of savings income each year.’

The proposal comes in the light of the recent interest rate cuts which have dropped the Bank of England base rate from 5.5% to 2% and with many analysts predicting further interest rate reductions to come.

Whilst rate cuts may be welcome news to those with mortgages, they’re not so good for savers. Savings accounts have had their interest rates significantly cut resulting in lower amounts earned on these accounts.

Shadow Chancellor George Osborne was quick to pick up on the tax exemption suggestion and said it ‘is worth looking at seriously.’

For a higher rate tax payer giving this savings tax exemption would be worth around £2,000.