40% tax on savings

n_farrow

Hi all, im currently saving up for a house deposit so have been doing a fair bit of overtime. I just worked out that i will hit the 40% tax bracket a week before April :-( Does this mean that any interest i earn on my savings will be taxed at 40%? or is it similar to the earnings (where only a fraction gets taxed at 40%).

Also do i have to tell the taxman? Or will they deduct 40% from my savings automatically?

Thanks in advance

jem16

n_farrow wrote: »

Hi all, im currently saving up for a house deposit so have been doing a fair bit of overtime. I just worked out that i will hit the 40% tax bracket a week before April :-( Does this mean that any interest i earn on my savings will be taxed at 40%? or is it similar to the earnings (where only a fraction gets taxed at 40%).

If your salary is already into higher rate tax then all of the savings interest would be taxed at 40%.

Basically you should add up your gross salary plus savings interest and then deduct any pension contributions. If you are over £43,475 some/all of it will be due for 40% tax - assuming you are on a standard 747L tax code and have no taxable benefits through work.

Also do i have to tell the taxman?

Yes you do.

Or will they deduct 40% from my savings automatically?

Thanks in advance

No the banks will deduct standard 20% tax from interest. You have to notify HMRC so that they can arrange for any further tax due. This can be done by a code change if you want that.

PennyForThem_2

I too am in this position though through death rather than savings. I notice you give a choice Jem16 or seem to, in that the code will tax your job earnings.

I would rather self assess - can I insist on this to HMRC or is there no option but accept whether thay say yes or no to assessment?

jem16

PennyForThem wrote: »

I would rather self assess - can I insist on this to HMRC or is there no option but accept whether thay say yes or no to assessment?

You say through death - is this a one-off situation or will it be ongoing?

n_farrow

Thanks Jem. I forgot to mention that im paid via PAYE do i still have to tell the taxman and the banks or will they know automatically? Its quite frustrating as im only just going to be in the 40% bracket. it seems quite unfair and i half wish i hadnt bothered doing the overtime now as i'll lose a large chunk of my interest from my house deposit fund. is there anything i can do to try and keep more of my hard earned cash?

atush

I know you are saving for a deposit, but you could put some into a pension to pull you under the HRT bracket.

Also, why are your savings attracting tax? HAve you not filled cash ISAs and maybe looked at NSI? Do you have a spouse who will be buying with you? You could put the savings that attact tax in their name so yours won't be taxed at 40%?

n_farrow

Hi Atush, I have filled an isa with this years allowance. The rest of my deposit is in a normal halifax savings account and i have yet to start a pension.

NSI is that premium bonds? That could be an option, its hard to know what to do. You try hard to get on the ladder and get penalised for your troubles.

forgotmyname

Work hard to buy your house and when your old they take it off you to pay for your care.

Makes you wonder.

chris_m

forgotmyname wrote: »

Work hard to buy your house and when your old they take it off you to pay for your care.

Where else do you propose the cost for care should be sourced then?
If someone needs care and has assets why should they not be expected to pay for that care?

xylophone

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

le_loup

forgotmyname wrote: »

Work hard to buy your house and when your old they take it off you to pay for your care.

OK, if that doesn't suit you, pay even more tax so that your care is paid for. You may be surprised when you grow up, to find that there is no Father Christmas and money does not grow on trees.