£500 to save!

natman

Truly.Yours wrote: »

Sorry for being a total n00b but I am brand new to money saving, haven't saved a penny as of yet.... how do I know if I pay higher rate or lower rate tax or even if I need to pay tax?

Most people will pay standard tax - only people who are high earners pay high tax( i think its around £40,000 salary a year)

No tax people are those who dont earn up to the tax threashold of £6035. So in your case if you a full time student and say just does bits and bats of work, probably wont pay tax on the money you get from your savings

Has this helped at all??

Truly.Yours

natman wrote: »

Sorry students, you aren't special, you pay tax just like anyone else. The reason many people assume student life is tax free is that no-one pays tax on the first £6,035 of income earned in the year, and as many students don't earn that, they never pay tax. However there is one piece of good news; neither the Student Loan nor the Maintenance Grant count as income, therefore they're untaxed.
If you earn less than £6,035 and only work during the holidays, ask your employer for a P38(S) form and you'll be paid tax-free. If you work throughout the year, then you need to pay tax as you earn; however contact the tax office to reclaim any overpaid tax at the end of the tax year (6 April).
Also, if you do save, make sure you use your tax-free Individual Savings Account (ISA) allowance to minimise the amount of tax you pay on savings (see the Best Mini-Cash ISA article). You may ask ‘if I don't pay tax, why bother with an ISA?' The answer is simple, you mightn't pay tax now, but probably will once you start working. You're allowed to save £3,600 in a mini cash ISA each tax year, so by putting it in there now, you're protecting it for the future.

If your income (this excludes loans / grants / parental support, but includes interest) is less than £6,035, you can sign an R85 form (verbal declaration accepted by most banks) with your bank to have interest paid gross. This applies to current accounts too.

ISAs can still be good for non-taxpayers, especially if your savings will remain in tact after you finish studying, because this means you will have more tax free interest income when you start earning.

If you think it's likely your savings will be spent during the year, and you are a non-taxpayer, chase the best rate and don't worry about ISA.
Whether you pay income tax or not depends entirely on your income, whether you are a student or not has nothing to do with it.

Thank you for the explaination. I have only had income as way of loan and grant. I intend to work in the summer, but I am sure I wont get paid more than £6,035. Does this mean that when i make a saving account I have to call the bank and ask for an R85 form?

Truly.Yours

natman wrote: »

Most people will pay standard tax - only people who are high earners pay high tax( i think its around £40,000 salary a year)

No tax people are those who dont earn up to the tax threashold of £6035. So in your case if you a full time student and say just does bits and bats of work, probably wont pay tax on the money you get from your savings

Has this helped at all??

Thank you for your help, it is very useful as I am new to these things. I will earn less than £6035 so as you said will I need to get R85 form? Sorry to keep bothering you with all my questions, I really apprecaite your help.

Lokolo

Truly.Yours wrote: »

Thank you for the explaination. I have only had income as way of loan and grant. I intend to work in the summer, but I am sure I wont get paid more than £6,035. Does this mean that when i make a saving account I have to call the bank and ask for an R85 form?

Yes. Its only taxable income, which loans and grants aren't, so you ignore them.

Yes I doubt you'll earn £6000 in summer

You can download a generic (not bank specific) R85 form here: http://www.hmrc.gov.uk/forms/r85.pdf

But with Halifax you can phone them up and say you want tax free interest because you aren't earning.

http://forums.moneysavingexpert.com/showpost.html?p=16164733&postcount=3

The link above has the phone number to ring once your account is up and running.

fullstop

Truly.Yours wrote: »

Thank you for your help, it is very useful as I am new to these things. I will earn less than £6035 so as you said will I need to get R85 form? Sorry to keep bothering you with all my questions, I really apprecaite your help.

The £6035 limit seems to have disappeared and been replaced with a new lower rate of "Age on 5 April under 65- £5435" or £104 per week down from £116.

From the R85 Helpsheet

Baldur

fullstop wrote: »

The £6035 limit seems to have disappeared and been replaced with a new lower rate of "Age on 5 April under 65- £5435" or £104 per week down from £116.

From the R85 Helpsheet

That was the rate before the Government made the 'one off' increase to £6035 in response to the revolt over the removal of the 10% tax band - the helpsheet hasn't caught up with events....

Truly.Yours

Thank you for all your help. I can now safely say I know the basics of saving and tax. I have looked up the rates for the banks and find that the Halfiax account in question has '*Limited offer - Open and fund an account before 1st December 2008 (although could be withdrawn earlier).'. As i cannot 'fund' the account before 1st december if I open it online I do not think I will be eligiable for this offer.

Could you please suggest the next best? I have looked at the Yorkshire BS Internet Saver and the Northern Rock eSaver but am still unsure as to which one I should choose, could you please advise?

Thanks again :)

natman

Thats a really difficult question to answer at present...............
With interest being cut on a daily basis its really difficult to know what to do.

I suppose in your case to have an ATM Card may be beneficial, but i dont know if it will.
Fixing for a period may be a good thing i dunno.


To give an example os savings over the last 3 months
3 months ago I had a Kaupthing Edge saver account -
This had interest rate of 6.65%
ING Have taken over the bank and the interest rate is now 4.55%.........I have just looked on their website and the interest rate is going to be around 2.5%.

Like I said. Have a look at Martins saver page at the top.
Have a look at Moneysupermarket.com saver section and take it from there.

Just try and choose a bank/build society that seems to be safe and is fully covered by the 50,000 COMPENSATION SCHEME and generally you should be ok.

Like i say. I have opened and closed around 9 accounts over the last 6 weeks, trying to get the best rates, but i am at present sticking with what I have got..............................

What I have is -
Birmingham Midshires esaver 2
Yorkshire Building society
Newcastle Building Society ISA
ICICI hisave account

Its a bit pot luck out there at present, so just make the best decision you can and stick to it for a bit..........

atypical

I'm also a student. I would recommend Kent Reliance's 6.26% cash ISA: it's a really good rate and has the advantages of being an ISA.

You can withdraw your money without penalty but have to do so by posting a form to their head office. You'd have to allow yourself a maximum of 2 weeks I'd say before you had the cash.

rb10

Truly.Yours wrote: »

Thank you for all your help. I can now safely say I know the basics of saving and tax. I have looked up the rates for the banks and find that the Halfiax account in question has '*Limited offer - Open and fund an account before 1st December 2008 (although could be withdrawn earlier).'. As i cannot 'fund' the account before 1st december if I open it online I do not think I will be eligiable for this offer.

You might be able to open it by phoning the online helpdesk at Halifax - 08456 02 00 00 (24 hours). If you can get it opened over the phone now, they will give you the roll number, so you can make the initial funding over the counter at a Halifax branch tomorrow, and also take in ID if required (they'll tell you on the phone if they will need this). (Only the first deposit is allowed in branch - for any others you will need to register for online banking.)

As natman says above, rates are changing all the time at the moment, so this one is fantastic if you can get it, as the rate is guaranteed for a year, so no need to keep switching!