tax on savings

georgiegirl_3

I wonder if anyone can help me. I'd like to know how much savings/money in bank your allowed before 40% tax is deducted.
Thanks.

milkydrink

BASIC rate tax is deducted UNLESS you fill in a special form as a non-tax payer. You can probably get the form at the banki if you are a non tax payer.
I don't think 40% tax is deducted at source from your interest ever, as the bank do not know your personal allowance & TTD - but someone feel free to correct me if I'm wrong.
HTH

tom188

It is not based on the amount of money you have in the bank but the amount you earn in any tax year.

If your total income more than £37435 pa (based on standard tax free allowance + 32400) you are liable to pay 40% tax on anything above this. If your salary is less than this but your savings income takes you over this threshold it is your responsibility to tell the revenue that you have tax to pay. If you are already a higher rate tax payer this amount must be declared on your tax form.

milkydrink

I read it as the tax on interest on savings (as it is). I think the OP knows this, I answered as if she did.

Can OP clarify, you did mean tax on interest on savings, didn't you?

Jake'sGran

I'm not being rude but I don't think the original poster understands how the tax system works i.e. the different levels depending on earnings. It is explained quite clearly on the Inland Revenue site. It had never occurred to me that someone would pay 40% tax on savings but if it is I'm not sure that it would be applied by the organisation where the savings are held. The IR just need to know how much in total has been earned in any tax year, including interest on savings, less any tax paid and if the balance is in excess of free pay allowed they would send a bill for what is owing. Isn't this the way it works? Just a thought, anyone worrying about paying 40% on interest should be using the full ISA allowance every year.

dunstonh

banks will only cover the 20% tax level on savings account. If your income takes you into higher rate tax level then you have to pay the additional amount as part of your tax return.

Interest can also result in a reduction in the age allowance as well as higher rate tax so someone over 65 earning more than £20,100 a year (including state pensions) is getting hit for an increased level of tax above basic rate.