The time has come to completely scrap tax on savings

Hungerdunger

Deleted_User wrote: »

Your first two sentences are a complete contradiction - What's the difference?!

You seem to be having trouble with this, don't you.

The savings you have accumulated are not taxed. You could keep it all at home and you won't have to pay a penny in tax. It is only when you put it into a bank account and that money starts earning interest that you are taxed on that interest.

Deleted_User wrote: »

Where do you think savings come from exactly?!

A large proportion comes from money put aside during a person's working life. But another large proportion comes from inheritances

Deleted_User wrote: »

I don't think it's fair that savers then have to pay income tax again, on interest, when they stick it in a savings account.

You are welcome to your point of view, but as someone who is in the same boat as you with regard to savings, I can't see what the problem is. Most forms of income are taxed; why should income generated from money which you may or may not have earned be treated differently?

Deleted_User wrote: »

At least David Cameron's got the right idea.

If he was to scrap tax on interest, he'd have to raise it elsewhere. Where would you like him to do this? And my bet is that once the tax on interest is scrapped, the banks will reduce their interest rates and you'll be back to square one.

masonic

LesU wrote: »

So what's stopping a bank selling you a cheap Ikea print for £10,000 and buying it back guaranteed in a year for £10,000 + 5% and you get the interest tax-free as a Capital Gain?
No, hang on. Isn't that what the US banks did with their bad debts?:D

What is stopping you is the bank could buy it back at £1000 and you lose £9000. It depends on what it's worth in a year and there are no guarantees.

If you end up getting £10,000 + 5% then, yes, you'd get that tax free as a capital gain if it was your only capital gain, but if you were renting it to your bank at that rate, you'd also get it tax free as income if it were your only income.

Yorkie-boomer

The way this Government thinks it's only time before they tax us on the savings we hold let alone any pitiful interest they may leave us with. Just what do they think we are all going to live on in our old age certainly not the almost non existant state pension which is being eroded daily. What did they do with the surplus left by the previous government anyway all our services are most certainly worst than 11 years ago!

masonic

Deleted_User wrote: »

Your first two sentences are a complete contradiction - What's the difference?!:rolleyes:

Are you really saying that if you pay, say, £50,000 into a bank account paying 5% interest, you can't tell the difference between the bank paying 20% of your savings and 20% of your interest to the taxman. The difference is about £9,500. Most people would not ask 'what's the difference' when faced with that. :rolleyes:

Masomnia

Yorkie-boomer wrote: »

The way this Government thinks it's only time before they tax us on the savings we hold let alone any pitiful interest they may leave us with. Just what do they think we are all going to live on in our old age certainly not the almost non existant state pension which is being eroded daily. What did they do with the surplus left by the previous government anyway all our services are most certainly worst than 11 years ago!

Firstly, what surplus?

Secondly, if you have time until you are retiring be aware that relying on savings for income is poor retirement planning. Drawing interest means the value of your capital will fall over time as it is eroded by inflation.

Hungerdunger

Yorkie-boomer wrote: »

The way this Government thinks it's only time before they tax us on the savings we hold

I appreciate this is your first post here, but if you are going to make wild assertions like this, it might be useful if you could give us some facts which lead you to this conclusion.

Yorkie-boomer wrote: »

Just what do they think we are all going to live on in our old age certainly not the almost non existant state pension which is being eroded daily.

I wouldn't call £90.70 "almost non existent". Whether it is being eroded is debatable, but it is increased annually in line with the RPI, and I believe that shortly it will be linked to the increase in average earnings.

Yorkie-boomer wrote: »

anyway all our services are most certainly worst than 11 years ago!

There you go again! Can you give us examples of which services are worse than 11 years ago and in what way they are worse?

[Deleted User]

masonic wrote: »

Are you really saying that you can't tell the difference between the bank paying 20% of your savings and 20% of your interest to the taxman.

Thanks for pointing that out, you're a genius!:T and so funny too!

I would ask you how old you are, but I know you can't count that high!:rotfl:

masonic

Deleted_User wrote: »

Thanks for pointing that out, you're a genius!:T and so funny too!

I'm glad you finally get it.

I would ask you how old you are, but I know you can't count that high!:rotfl:

Though I realise it's natural to judge others by one's own standards, you may find it interesting to learn not everyone who is asked their age needs to count on their fingers to reach the answer.

Mad_old_tory

Personal opinion? Tax in general in this country is too high, I'd much prefer the private sector to have a greater role, although the current crisis is starting to cast doubt on that.

We have to be pragmatic, however, and realise that the government is comitted to a certain strategy of spending which requires these taxes (and more!). There is no possible way for tax on interest to be removed without a corresponding hike in tax elsewhere. My question is should savers be rewarded while everybody else loses out? Well, financial discipline should be rewarded but with the economy as it is at the moment, it would probably do more harm than good as people would likely reduce their spending even more!

jimbow25

PasturesNew wrote: »

ISAs are only good for people who consistently have enough spare cash left to be able to save. For poor people who suddenly come into a spot of money it's not much use.

e.g.
A wealthy couple sticking £3k/year into an ISA for 10 years would have £60k untaxed (plus compounded interests)
A single person suddenly winning/inheriting/getting £60k would be taxed on the interest gained on all of it.

And ... ISAs are quite complex. I have one, I'd like a 2nd but I am scared/don't really understand.... and there are too many.

Your example illustrates the benefit of the current system to me, not what's wrong with it.

ISAs were designed to encourage people to save, which is why everyone gets a modest allowance every year. The government would rather rather the tax benefit went to anyone who was committed to saving up to a certain amount, and not to someone who unexpectedly received a load of money but wanted a good return on it, or who earns enough that they can save well in excess of the current allowance.

If the system needs changing it'd be good to see the limit go up but scrapping tax on interest altogether would be a mistake in my view, it'd only benefit the richest/high earners.

By comparison: you used to be able to save 15% (I think) of your salary tax free in a pension scheme but from 2006 it became 100%. Who has that increase benefited, an average earner, who saves what they can afford towards retirement? Or someone who earns a very high salary? I think making all savings tax free instead of having an annual allowance would similarly give greatest tax benefit to high earners.