Question on savings interest
Caterina
Posts: 5,919 Forumite
Hello, I hope someone can give me some advice please. My husband's salary has finally reached the higher tax band, by only a few £. How does it affect interest on his savings?
We have a joint Santander account and I do not pay any tax on its 3% interest because I do not have an income, so they take 20% of 1/2 of the interest. Now that he is in the next tax bracket, should he pay 40% on his interest?
Also, I know that there was something about tax relief on savings in the last Budget, but I cannot remember the terms. Would it apply to our savings?
Thank you for any help you can give me.
We have a joint Santander account and I do not pay any tax on its 3% interest because I do not have an income, so they take 20% of 1/2 of the interest. Now that he is in the next tax bracket, should he pay 40% on his interest?
Also, I know that there was something about tax relief on savings in the last Budget, but I cannot remember the terms. Would it apply to our savings?
Thank you for any help you can give me.
Finally I'm an OAP and can travel free (in London at least!).
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Comments
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Yes, Santander will still deduct the basic 20% and he'll have to arrange payment of the additional 20% to HMRC, usually via self-assessment after the end of each tax year.We have a joint Santander account and I do not pay any tax on its 3% interest because I do not have an income, so they take 20% of 1/2 of the interest. Now that he is in the next tax bracket, should he pay 40% on his interest?0 -
There's going to be a new personal savings allowance taking effect from April next year, which means that the first £1000 of interest you receive (or the first £500 for higher rate taxpayers) will be tax-free. However until then he has to pay extra tax on any interest he receives.Also, I know that there was something about tax relief on savings in the last Budget, but I cannot remember the terms. Would it apply to our savings?
Remember that he can deduct any pension contributions from his income when calculating whether he's a higher rate taxpayer - and reclaim a further 20% tax relief on them. If he's paying into a pension it may be worth increasing his contributions slightly so that his net income stays below the higher rate threshold - and if he's not paying into one then now would be a good time to think about starting.0 -
Increase his pension contributions to take him out of 40% tax.0
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Hello, I hope someone can give me some advice please. My husband's salary has finally reached the higher tax band, by only a few £. How does it affect interest on his savings?
We have a joint Santander account and I do not pay any tax on its 3% interest because I do not have an income, so they take 20% of 1/2 of the interest. Now that he is in the next tax bracket, should he pay 40% on his interest?
Also, I know that there was something about tax relief on savings in the last Budget, but I cannot remember the terms. Would it apply to our savings?
Thank you for any help you can give me.
are you sure he is in the 40% band?
that mean he would earn 42,385 after deduction of any pension payments (plus and BIK)
anyway he only pays 40% on the amount over 42,385 : for small sums a phone call to HMRC or a letter after year end is sufficient : they will probably adjust his tax code to collect the money0 -
Thank you all. The amount of interest is tiny, so we will check with the Inland Revenue at the end of this tax year. Not much point to increase his pension contributions because he is 6 months away from retirement age!Finally I'm an OAP and can travel free (in London at least!).0
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Pay in as much as possible while he still has earned income?0
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Not much point to increase his pension contributions because he is 6 months away from retirement age!
Are you insane?
If he saves an extra £6,000 in this period he will have £10,000 invested (assuming it all attracts 40% tax relief).
He can withdraw £2,500 tax free on retirement. The other £7,500 can be taken after paying tax at 20% (probably) after 6th April.
You turn £6,000 into £8,500 = 42% gain.0
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