paying tax on interest earned

samuela66

Hi, Sorry if this is a stupid question, but I notice that tax gets taken out of the interest on my savings account, do i have to pay this, I am in full time employment adn a regular tax payer, why should I pay tax on my savings, can I do anything to avoid paying this.
Thanks

Reaper

I'm afraid you have to pay it. Interest counts as earnings and is therefore taxed. Only if you are a non-tax payer could you get them to stop deducting it. If you are a higher rate tax payer you will have to pay even more when you do you tax return because they are only deducting tax at basic rate.

To avoid paying it take out a cash-ISA if you haven't already. It pays interest tax free. You can deposit up to £3000pa.

Pottymouth_2

Oh me oh my.....

I ask myself this self same question every time I see my bank statement - and when i see my wage slip - the amount that is taken in tax and NI brings a tear to my eye everytime. Its about the same sort of feling you get when you pull a nose hair out with tweezers...*G

Tax and death (and TV licence)... you'll never escape them in the UK.

Only way to really avoid paying tax is to get hugely rich and hire KPMG to fill in your tax form - it will become non-fiction - btu you'll pay less tax.

Anyway - to answer your question - get used to that "pulling a hair out of your nose" feeling - you have to pay taxes on normal savings in the UK.

*sigh*

Potty.

samuela66 wrote:

Hi, Sorry if this is a stupid question, but I notice that tax gets taken out of the interest on my savings account, do i have to pay this, I am in full time employment adn a regular tax payer, why should I pay tax on my savings, can I do anything to avoid paying this.
Thanks

lipidicman

Pottymouth wrote:

it will become non-fiction - btu you'll pay less tax.

You mean it will become fiction! but not quite
That's tax AVOIDANCE (LEGAL) not EVASION (ILLEGAL)

samuela66

Thanks guys, does a cash isa pay the same interest as my ing direct account , cheers!

robnye

samuela66 wrote:

Thanks guys, does a cash isa pay the same interest as my ing direct account , cheers!

probably about the same

but will depend on who you take the cash isa out with, remember you can invest £3000 before april, then another £3000 after.......

pottymouth

Its about the same sort of feling you get when you pull a nose hair out with tweezers...

you are obviously talking from experience....... ouch :eek:

Reaper

samuela66 wrote:

Thanks guys, does a cash isa pay the same interest as my ing direct account , cheers!

Possibley slightly more. I think ING pay 5% (before tax) whereas these ISAs will pay more (rates from memory):

Yorkshire BS: 5.2%
Abbey Postal ISA: 5.35%
A&L Direct: 5.4% (but a £25 transfee fee)

These are all tax free.

monki_man

samuela66 wrote:

tax gets taken out of the interest on my savings account, do i have to pay this, I am in full time employment adn a regular tax payer, why should I pay tax on my savings

I know! out of order isnt it

deemy2004

samuela66 wrote:

Hi, Sorry if this is a stupid question, but I notice that tax gets taken out of the interest on my savings account, do i have to pay this, I am in full time employment adn a regular tax payer, why should I pay tax on my savings, can I do anything to avoid paying this.
Thanks

yes its diabolical that we are both taxed when we earn the money and then again on the interest !

It is dispicable but that is the way things are. The only saving grace are the tax free accounts such as Cash ISA's

But very limited, as once your deposits equal the annual allowance, thats it no matter if you withdraw, you cannot add another penny again with out breaking the tax free status.