Earning £30k and £240k in savings. What tax?

pmcx9

Hi,
My house sale is going through next week and I am going to rent in the shortterm. I earn just under £30k pa.
What tax I am likely to pay on my savings of £240k from the house sale?

Thanks for any advice.
pmcx9

anamenottaken

Depends on what rate of interest you get. If your interest from all your savings in the tax year added to your salary comes to more than the threshold for paying 40% tax, you will have to pay an additional 20% tax on the amount above that threshold.

swiss69

You will be taxed 20% at source and receive the net rate. Tax on savings is assessed on you in the tax year you receive the interest. For example if you select an account paying say 5% providing monthly income then this tax year you will have no further liability as you will be below the Higher rate tax threshold.

If you earn say £12,000 in a tax year from your savings then you will be liable for Higher rate tax on a small proportion only. (Around £2000) - You can take steps to mitigate this by investing in ISA this year and next. There are various other Investments where you can reduce any liability too but thats a different discussion!

If you plan to keep the money in savings just for a short period then you will have nothing to worry abput..

pmcx9

thanks guys.
i will likely buy a house again when things settle down in 9months or so.
i have rented a place and hoped my interest achieved would cover the rent but had omitted to take into account my income plus interest tipping me into the 40% band.

I need to spread the savings around to stay at the £50k limit in each one so I doubt I will get an average of much over 5% gross

with what you are saying i should avoid 40% bracket in tax year 2009/10 at it will not affect me unless my income exceeds £43.5k (£6k+£37.5k)