Student Tax-free Savings

cowboy

Hi all,

I recently got back into education by taking a postgraduate course and as a full-time student, I understand that I will not have to pay any tax.

I have money in Cash ISA but the rate is obviously very low. I was thinking of pooling all my money from ISA into Lloyds TSB Vantage Account (which has higher interest rate for amount between £5k and £7k).

My questions:
- Is this a good move?
- Will Lloyds pay out the interest into my account tax-free, or do I have to file a claim for this?

Hope to hear some advice. Thanks!

missile

My Answers
-It will make you a little more money in interest. You appreciate you loose the ISA allowance?
-Interest is taxed at source, unless you complete R85.

cowboy

missile wrote: »

My Answers
-It will make you a little more money in interest. You appreciate you loose the ISA allowance?
-Interest is taxed at source, unless you complete R85.

Thanks, Missile.

My understanding is that because I wont be taxed, ISA or not doesn't make any difference to me? Or am I wrong? As long as my interest is less than the tax-free personal allowance?

olivetti

Does not matter if you are a student or not if you earn above the personal allowance you will be taxable on that income. If you do not have any other income other than your bank interest then as long as that in less than £6475 this tax year you will not pay tax.

Students do still have to pay income tax using the same rules as everyone else, there are no exemptions.

http://studenttaxadvice.direct.gov.uk/index.html

cowboy

olivetti wrote: »

Does not matter if you are a student or not if you earn above the personal allowance you will be taxable on that income. If you do not have any other income other than your bank interest then as long as that in less than £6475 this tax year you will not pay tax.

Students do still have to pay income tax using the same rules as everyone else, there are no exemptions.

http://studenttaxadvice.direct.gov.uk/index.html

Yes, it is impossible for me to earn more than £6475 from the savings interest... and I dont have any income elsewhere apart from my PhD stipend. So all these seemed to suggest that Vantage is a better option than tax-free ISA. I wasn't sure though...so just thought I should ask everyone's opinion.

scottishblondie

Just thought I'd post seeing as I am in the same situation (almost). I'm in the last 6 months of my PhD, so I've been enjoing a tax-free income for 3 years now I also do tutoring work at the university, so a portion of my income is taxable. However, this + my interest does not exceed the tax-free allowance.

I decided to keep my ISAs as I had built up a nice stash that I wanted to keep tax-free for the future, but I suppose this is a personal choice. If your savings are less than the ISA allowance then you are as well taking them out as you could always just put them back into a new ISA!

A Vantage account is a good choice, I've got 2. To get your interest paid tax free you'll need to complete an R85 form for each of you accounts. Make the most of it while it lasts

cowboy

scottishblondie wrote: »

Just thought I'd post seeing as I am in the same situation (almost). I'm in the last 6 months of my PhD, so I've been enjoing a tax-free income for 3 years now I also do tutoring work at the university, so a portion of my income is taxable. However, this + my interest does not exceed the tax-free allowance.

I decided to keep my ISAs as I had built up a nice stash that I wanted to keep tax-free for the future, but I suppose this is a personal choice. If your savings are less than the ISA allowance then you are as well taking them out as you could always just put them back into a new ISA!

A Vantage account is a good choice, I've got 2. To get your interest paid tax free you'll need to complete an R85 form for each of you accounts. Make the most of it while it lasts

You're right... I didnt actually think that far... ie ISA savings will remain tax free even after I get back into workforce. But even the best ISA now is quite low in terms of interest... might need to do some calculation before I decide. Thanks

How can you get 2 Vantage account? Do they actually allow you to do that?

missile

cowboy wrote: »

You're right... I didnt actually think that far... ie ISA savings will remain tax free even after I get back into workforce. But even the best ISA now is quite low in terms of interest... might need to do some calculation before I decide. Thanks

How can you get 2 Vantage account? Do they actually allow you to do that?

If you are in a position to keep your savings, I would recomend you transfer your ISA to a fixed rate ISA, e.g. Nationwide 4% fixed for three years.

You can open up a number of LTSB current accounts with Vantage. I have opened my fourth this week. That is 4X £7000 @ 4.00% before tax.

If your total income is less than your allowances you complete R85 to have the interest paid without reduction of tax. With LTSB you can declare two accounts on one R85 form.

Of course you can claim back any overpaid tax. In your situation, I guess you will have taxed earnings from April to now? You can ask IR to carry out an assessment.

scottishblondie

Lloyds say on their website that you can have up to 3, but their branch staff often don't know this! Some will tell you that you're only allowed one, others will let you open more than 3. I opened mine in branch, as I was automatically rejected online (I think because I'm a "student") but the staff were more than happy to give it to me, as well as a credit card.

I agree the ISA rates are pants these days, but I'm hoping they'll go back up! My strategy for this year was going to be to keep money in a normal account (eg Vantage) and then bung it into an ISA before the end of the tax year, so I get decent interest during the year but protect it for the future, but then I opened a regular saver ISA. Perhaps something like that would work for you?

On a side note - most organisations don't distinguish between "student" and "postgraduate student", something which I find really unfair given that we actually have a stable income! So you need to be selective in how you apply for things, and often speaking to a real person will work better than applying online.