Abolish tax on savings

arrowsmith

loaner wrote: »

Cash isa's are a bureaucratic waste of time, they always pay a lower rate than equivalent non-isa account, are difficult to move, have restricted terms, can be withdrawn at any time. At current rates of interest, the tax free benefit is worth peanuts to a basic rate tax payer.

They are not a huge benefit each year but worth having. With the effect of cumulative interest it will make a difference in many years time. ISA accounts used to pay more than ordinary accounts and over recent years this has changed, I'm sure it'll get closer at some point. They are not particulalry difficult move, I've moved several times, get two good banks/building societies its easy. Avoid, Abbey, Nationwide or Barclays :eek:

Patr100

Reduced tax on saving is a non starter -however given the recession and the need to supposely increase "spending" which goes into the economy rather than "saving" power which may not - reduced tax on spending (even temporary) is another matter.

http://www.thisislondon.co.uk/standard/article-23584102-details/Brown+may+bring+in+massive+tax+cuts/article.do

LGG_2

tax on savings under a certain amount should be scrapped imo.say 50K and below hten with different levels of tax depending on the amount you have after that. the goverment wants ppl to save yet continues to take any chance it gets. the money that created the intrest has already been taxed once when you earned it.

LGG_2

a question ive wondered about.say u win the lotto and have a million pounds. so therefore you stop working and stop being a income tax payer do you get the intrest off the 1 million tax free? are the winnings taxed? prob a stupid question but there you go lol

Andy_L

The interest will be taxed as it is income.

RayWolfe

Interesting that you know in post 47 what should be done. Then in post 48 you ask the "stupidest" (your word) question.
Any earnings, including interest is liable to tax if it is over the personal allowance.

StarRover

LGG wrote: »

a question ive wondered about.say u win the lotto and have a million pounds. so therefore you stop working and stop being a income tax payer do you get the intrest off the 1 million tax free? are the winnings taxed? prob a stupid question but there you go lol

To answer your question(s) in full; The winnings are not taxed but any interest earned from those winnings is.

LGG_2

Interesting that you know in post 47 what should be done.

where did i say i KNOW what should be done.? I gave my OPINION which is what message/discussion boards are about or perhaps you didnt realise that.

thanks to those for answering it.

MrMicawber_2

I don't think anyone's mentioned VAT in this discussion yet. I guess my point is that we pay 17.5% VAT on most things we buy and 20% or 40% on savings interest. It does seem slightly wrong than those who take care and save are hit harder for tax than those who don't. If there was a will to do it the Gov't would but it's any easy touch. I can think of plenty of areas where money could be saved left right and centre, but I still think that whether to tax savings or not is trivial compared to many other things and specifically, with regard to matters financial, the pensions time bomb I mentioned above.

That said most of us can avoid paying tax on savings & investing as it is with ISA's (£7,200 pa), NS&I indexed linked certs (15k per issue but you can reinvest - need to commit for 3 - 5 years though) , pension (at least until converted to an annuity) (max of income up to £235,000 this tax year). If you regard paying off the mortgage as one of the best forms of saving then I would count this as well - humour me here, the logics a bit tortuous I know.

earlgrey_3

Zebra wrote: »

The same could be said for those earning wages when their wage increases are less than the rate of inflation, yet they still have to pay tax on all their wages.
Nobody enjoys paying tax but it's the price you pay for living in the society that we do.

Hmm, arithmetic isn't your strong point is it? :rolleyes:

Of course it isn't the same. If you receive a wage then you receive a positive gain regardless of whether you earn more or less than previously. (Tax allowances are traditionally index linked anyway but that isn't relevent.) Both Jonathan Ross and his dustman both receive a positive gain from their wages.

If you receive 5% interest on your capital but inflation makes your capital worth 5% less than you originally lent to the bank then you have gained nothing, i.e. zero, zilch.

That's why it's a bad for people to think that the full amount of interest they receive can be treated as income. If they do that then their capital will be eroded. What you earn on capital is only what it returns after inflation.