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40% tax on earnings...affect on savings
WaxiesDargle
Posts: 1,062 Forumite
Hi
if someone has a small amount of salary taxed at 40%...does this affect any savings that's not in an ISA?
if someone has a small amount of salary taxed at 40%...does this affect any savings that's not in an ISA?
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Comments
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Yes. Your savings are taxed at your highest marginal rate, so you will need to pay an additional 25% of your interest to the taxman each year. Your savings interest can actually make you a higher rate taxpayer for some of your interest if you are slightly below the higher rate threshold.
Sorry if that's not great news!I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
Thanks Aegis
the benefits of a pay increase that goes over the 40% threshold works out at £130 a month...hardly worth it is it!!?0 -
In this economic climate, definitely worth it!Mortgage Free thanks to ill-health retirement0
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I'd take it... Right now an extra £130 would mean a lot to me. Single income cohabiting couple hereWaxiesDargle wrote: »Thanks Aegis
the benefits of a pay increase that goes over the 40% threshold works out at £130 a month...hardly worth it is it!!?
I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
effect, not affect
sorry0 -
tobiascurious wrote: »effect, not affect
sorry
I was struggling with which one it was...thanks for the pointer 0 -
WaxiesDargle wrote: »Thanks Aegis
the benefits of a pay increase that goes over the 40% threshold works out at £130 a month...hardly worth it is it!!?
Surely a pay increase that did not take you over would be even less. I wouldn't complain.0 -
If you've got a lot of savings it doesn't seem worth it.
If you've no savings, or they're all in ISAs the grab it!
Of course, if you have a mortgage where you can retrieve your overpayments then put the savings money into there and it will be your mortgage rate equivalent you save in interest.Member of the first Mortgage Free in 3 challenge, no.19
Balance 19th April '07 = minus £27,640
Balance 1st November '09 = mortgage paid off with £1903 left over. Title deeds are now ours.0 -
WaxiesDargle wrote: »Thanks Aegis
the benefits of a pay increase that goes over the 40% threshold works out at £130 a month...hardly worth it is it!!?
If you are that close it's possible your savings interest took you into the higher rate tax band anyway.
It's still extra income - it's not as if you suddenly pay 40% tax on everything, only the small amount that you are into the higher rate tax barcket by.
You could pay extra into your pension and bring yourself back into basic rate if you wanted.0 -
what is the amount of the 40% threshold?0
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