32% tax on savings interest?

ed123_2

....there is an article in today's Independent (can't do the link) which states the chancellor will announce in next weeks budget proposals to merge income tax & ni, giving an effective tax rate of 32% (ie basic tax rate 20% plus ni at 12%.) It states there will be winners & losers, it looks like us savers will be the losers.....:mad:

dunstonh

Ni has effectively become a tax on those working. So, removal of it is a good idea.

alanq

I assume this is the article referred to.
http://www.independent.co.uk/money/tax/osbornes-secret-plan-to-raise-tax-ndash-and-scrap-national-insurance-2244091.html

barak

At least the recent "Office of Tax Simplification" report states -
"Obviously, the position of pensioners, who currently do not pay NICs will need to be considered thoroughly."

http://www.hm-treasury.gov.uk/d/ots_small_business_interim_report.pdf

jimjames

ed123 wrote: »

....there is an article in today's Independent (can't do the link) which states the chancellor will announce in next weeks budget proposals to merge income tax & ni, giving an effective tax rate of 32% (ie basic tax rate 20% plus ni at 12%.) It states there will be winners & losers, it looks like us savers will be the losers.....:mad:

Another reason to get as much into ISAs as you can, even if you don't pay tax at present.

DavidHayton

ed123 wrote: »

....there is an article in today's Independent (can't do the link) which states the chancellor will announce in next weeks budget proposals to merge income tax & ni, giving an effective tax rate of 32% (ie basic tax rate 20% plus ni at 12%.) It states there will be winners & losers, it looks like us savers will be the losers.....:mad:

If this happens then there is even more reason to get as much as possible within an ISA.

However, they do not have to apply the same rate to savings and earnings. There is precedent for having different rates of tax on different types of earnings. The current system where two completely separate taxes (Income Tax and NI) are levied by the same body (HMRC) on earned income just seems barmy to me.

So, if NI does get incorporated into income tax, would we be able to reclaim 32% tax on pension contributions, charity donations, union subs, professional fees, etc. I suspect not! We may end up with an even more complicated system than we suffer at present.

David

lisyloo

Why would anyone want to pay income tax on savings anyway?
I have ISAs, NSI, pensions and an offset mortgage to avoid tax.
Pretty much avoid it completely apart from a few pence on my current account.

jem16

lisyloo wrote: »

Why would anyone want to pay income tax on savings anyway?

Nobody wants to but it isn't always possible to avoid it.

I have ISAs, NSI, pensions

So have I but still have investments/savings outwith even though I maximise my ISA limits each year.

and an offset mortgage to avoid tax.

I don't have a mortgage.

StevieJ

This could be a real bombshell for the early retired.

evenasus

lisyloo wrote: »

Why would anyone want to pay income tax on savings anyway?

I don't 'want' to but I have no choice.
Both myself and my husband have saved the maximum each year in ISAs and before that TESSAs.
But we have far more saved in other accounts, which we cannot avoid paying tax on.
Our mortgage was paid off some years ago.

soulsaver

StevieJ wrote: »

This could be a real bombshell for the early retired.

Yep - how does a 60% increase in tax paid sound?:mad: