Tax on savings??

BBGirl_2

I'm reallly, really, really bad at saving, so please forgive the stupid questions!

Soooooo say I could afford to save around £4000 a year, I put £3000 in an ISA and the rest I put in a savings account.

How much tax is paid by me for saving??

Can I top up my ISA with £3000 every year?

What would you do if you could save £4000 a year???????:wall: :undecided

PS. I'm a student.....will be starting an undergrad this sept.............so I'll be saving from the loan I get....hoping to pay some money off the loan and any debts after 5 years studying with the interest I get.

Hereward

Interest on an ISA is tax free, so you will only pay tax on £1000 of your savings. The rate will depend on your nominal rate, i.e. are you a Non, Basic, or Higher Tax payer?

Non-tax payes will only pay yax on interest over their tax threshold;
Basic Tax payers pay tax at 20%, i.e. you will only get 80% of the AER quoted;
Higher Tax payers pay tax at 40%, i.e. you will only get 60% of the AER quoted.

BBGirl_2

How much is a non tax payer allowed to save?........bearing in mind that after my 5 years of studying I will be a full tax payer....hopefully!

grumbler

BBGirl wrote:

How much tax is paid by me for saving??

If you are a taxpayer, bank will take 20%. If you are not a taxpayer, you can register account(s) to receive interest gross (form R85). If you are a basic rate (10%) taxpayer, you can claim half of the 20% tax back from the IR. If you are a higher rate (40%) taxpayer, you must pay extra to the IR.

Can I top up my ISA with £3000 every year?

Yes. See ISA FAQ , ISAs - save tax and other articles in Savings and Investment section

What would you do if you could save £4000 a year???????

See Starting Saving guide.

PS. I'm a student.....will be starting an undergrad this sept.............so I'll be saving from the loan I get....hoping to pay some money off the loan and any debts after 5 years studying with the interest I get.

It is more than likely that you are not a taxpayer. See http://www.hmrc.gov.uk/rates/it.htm and submit R85 forms for all your accounts.

BBGirl wrote:

How much is a non tax payer allowed to save?......

This financial year allowance is £5035 that includes interest on savings.

isasmurf

Hereward wrote:

Interest on an ISA is tax free, so you will only pay tax on £1000 of your savings. The rate will depend on your nominal rate, i.e. are you a Non, Basic, or Higher Tax payer?

Non-tax payes will only pay yax on interest over their tax threshold;
Basic Tax payers pay tax at 20%, i.e. you will only get 80% of the AER quoted;
Higher Tax payers pay tax at 40%, i.e. you will only get 60% of the AER quoted.

You forgot Starting Rate taxpayers pay tax at 10%, i.e. you will only get 90% of the AER quoted.

Hereward

True, I had forgotten about the Starting Tax braket. A good guide to savings tax can be found here:

http://www.direct.gov.uk/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/TaxOnSavingsAndInvestmentsArticles/fs/en?CONTENT_ID=4015739&chk=ygsRyW