Individuals on low incomes should check whether they are eligible to claim back tax deducted from savings income in past years now that they have received their P60s as claims can be made up to four years in arrears.

Under the old rules, up until 6 April 2016, financial institutions like banks and building societies had to deduct 20% basic rate tax from interest paid to individuals’ accounts, unless the person was a non-taxpayer and registered to have interest paid gross.

Some people who had tax deducted from their interest were then eligible to claim some or all of it back.

For example, they might have been liable for some tax on their income (and therefore ineligible for interest to be paid gross), but if their total tax bill was less than the amount deducted by their bank or building society, they could claim back the difference. Alternatively, some of the interest might have fallen within the starting rate for savings on which they would have owed tax at 10% to 5 April 2015, or zero per cent thereafter.

Under the new savings taxation regime introduced from 6 April 2016, banks and building societies are no longer required to deduct basic rate tax from most interest payments.

At the same time, basic rate taxpayers can now have tax-free savings income of £1,000, while if their total taxable income is £17,000 or less, they will not pay any tax on their savings income.

Anthony Thomas, chairman of Low Income Tax Reform Group (LITRG), said: ‘The new savings income rules have their own set of complexities for some, but are good news for many people on low incomes as they no longer have to reclaim tax on savings in future.

‘The problem with change is that it can be confusing and there is a risk that people will now forget to reclaim tax for earlier years thinking they no longer need to do anything, which is a worry.

‘When checking last year’s tax, it is worth looking at earlier years, too. You usually only have four years to claim back overpaid tax.’