savings and tax

Maybe_its_because

Hi,

Hoping someone can help me clarify a conundrum relating to tax.

I have just received my PAYE coding notice and this year, I actually read it.:o

I've recently got a new job which pushes me into the 40% tax bracket, so for the first time in my life I'm considered a higher earner ... a bit scary and grown up.

So, I have been saving over the last few years always filling my ISA allowance first and any additional saving has been in high(ish) interest one year fixed rate (i.e. HSBC/FD) accounts.
I'm not planning on opening any more non-ISA savings accounts in the next financial year as I'm concentrating on OP-ing my mortgage.

But.... I'd already set up my usual 1 year fixed rate HSBC account 4% saver (from Jan 12 to Jan 13) and wonder what tax implications this will have for 2012/13. Its a maximum of £3,000 total balance so not a huge amount. Does the bank pay the basic tax rate on interest or the higher rate? Do I need to prompt them?

Thanks for your advice

MIB

qpop

The bank will only pay basic rate tax on your behalf - 20%.

If your tax affairs are simple you may be able to ask HMRC to cover your extra tax burden by way of a different PAYE code. It's best to give them a call and explain the situation.

It's more likely they'll ask you to fill out a tax return, but this can be clarified by a phone call.

gadgetmind

Do you have the option of increasing your pension contributions (ideally company pension but any pension will do) to get yourself back out of the 40% bracket?

If you remain in that bracket, you will have to tell HMRC about your interest income via an online self certified tax return. ISTR there is maybe a single form version for simple cases, and they might even be able to code it - others will know better.

All of our interest is earned by my wife, who doesn't work, as no way am I paying 40%+ tax on top of meagre interest!

Stompa

Maybe_its_because wrote: »

But.... I'd already set up my usual 1 year fixed rate HSBC account 4% saver (from Jan 12 to Jan 13) and wonder what tax implications this will have for 2012/13. Its a maximum of £3,000 total balance so not a huge amount. Does the bank pay the basic tax rate on interest or the higher rate? Do I need to prompt them?

See here:

http://www.hmrc.gov.uk/taxon/bank.htm

Maybe_its_because

Thanks for your advice and directions.

All our savings in the future (which aren't in the ISA wrapper) shall now be in my partner's name. This won't be much with the planned Mortgage OPs.

I do like the pension increase idea - I'm in an institutional Superannuation scheme so I'll talk to my representative about how this might work for me.

Thanks Stompa for the link - I spent ages on the HMRC website investigating basic/higher tax this morning so back I go....:D

MIB

CLAPTON

you new job pays more than

7475+35,000 - pension payments + benefits in kind ?

gadgetmind

Maybe_its_because wrote: »

All our savings in the future (which aren't in the ISA wrapper) shall now be in my partner's name. This won't be much with the planned Mortgage OPs.

Just make sure you have a rainy day cash buffer.

My wife holds all of our cash and most of our unwrapped investments. To avoid complications, she holds the investments in accounts to which she doesn't know the password, but she handles the cash accounts, so that's fair.

Maybe_its_because

Thanks gadgetmind - I've 4 years worth of ISAs stored away for rainy day so happy with that amount sitting in the background while the mortgage is OP'd.

Love the password control, best of both worlds

Clapton - thanks for the info - the 12/13 rates are 8105 + 34,370 so effectively the same total as you referred to.
I've set up a meeting with my relevant payroll/pension bod at work as I'm not 100% sure of the value of the benefits in kind so hopefully can find the most tax efficient way through this...

MIB