Budget announcements for Savers

AirlieBird

There is a curious announcement in the Budget Report about taxation on interest on savings .

Income tax rules on interest


– The Government will consult shortly after Budget 2012 on proposals for possible changes to the income tax rules on the taxation of interest and interest-like returns, and rules on the deduction of tax at source from such amounts. (Finance Bill 2013)

and an announcement on ISAs.

Individual Savings Account (ISA) market improvements
– The Government will work with industry to improve competitiveness and transparency in the ISA market. Building on the positive changes made since the Office of Fair Trading report on the cash ISA market in 2010, the Government encourages industry to reduce transfer periods as far as possible, making use of technological advances in how funds are transferred and how information is exchanged between providers. Alongside this, the Money Advice Service, which provides free and impartial advice on financial matters, will develop and introduce web-based resources to show consumers when ISA bonus rates are ending.

opinions4u

I'd suggest things like cashback on the Santander account will fall under that scope.

They should probably scrap the 10% savers rate of income tax too. Pointless complexity and the higher personal allowances effectively rebate it.

The ISA paragraph is a waste of paper and means nothing.

SnowMan

CGT annual exemption limit at £10,600 for 2012/2013 and then indexed annually with CPI as expected.

2.73 Capital gains tax (CGT): annual exempt amount – As announced at Autumn Statement 2011, the CGT annual exempt amount (AEA) will remain at its 2011–12 level of £10,600 for 2012–13. From 6 April 2013 the AEA will rise in line with the CPI instead of the RPI, as announced at Budget 2011. (Finance Bill 2012) (b)

ed123_2

"They should probably scrap the 10% savers rate of income tax too. Pointless complexity and the higher personal allowances effectively rebate it."

No thanks I rather like it! He's phasing out age related personnel allowances to reduce complexity.........I like................not!....ed

income tax rules on interest


–" The Government will consult shortly after Budget 2012 on proposals for possible changes to the income tax rules on the taxation of interest and interest-like returns, and rules on the deduction of tax at source from such amounts. (Finance Bill 2013)"

They could be looking for a way to flag up a 40% deduction at source re higher rate tax payers which seem to confuse / are conveniently forgotten by a number of people.

RetiredInThailand

Maybe they are finally going to scrap tax on savings interest, as of course they should.
Especially as they tax you on the total return and not the return after inflation (which recently has been negative for most savers).

MoneySaverLog

ed123 wrote: »

They could be looking for a way to flag up a 40% deduction at source re higher rate tax payers which seem to confuse / are conveniently forgotten by a number of people.

Impossible to do as they don't know whether you will fall into this bracket. As an example say you earned 40,000 a year, you'd still be in the basic rate tax band.

But if you earned a bonus in your last pay packet of say £5,000 then that would push you into the 40% band, and HMRC would not know about that until the very last month of the year so would not have known to collect any extra interest automatically at source.

My thinking anyway as even though they have lowered the threshold of the 40% tax, I'm unlikely to get near this unless they promote me at work some day.

Reaper

MoneySaverLog wrote: »

Impossible to do as they don't know whether you will fall into this bracket. As an example say you earned 40,000 a year, you'd still be in the basic rate tax band

Surely it would be no different to the current system. They don't know for sure if you are a basic rate tax payer. Even if your income exceeds the nominal allowance you could be making use of allowances for SIPPs etc. So you tell the bank whether to pay you gross or not.

I assume the same would happen here in that you would tell them whether to pay you gross, deduct basic rate or higher rates. If you get it wrong it will be clawed back/refunded in an end of year tax return.

alanq

Some people are already paying 40% tax on some of their interest during the tax year that it is paid. Based on the previous year's interest lump sums are demanded or their tax codes are adjusted to take payments taken ON ACCOUNT for the interest they are EXPECTED to receive during the current year.

It is unjust that someone who has to pay a little tax has their interest taxed and source at 20% and then has to reclaim nearly all of it much later. Similarly it would be unjust for someone who is only just a higher rate tax payer to have 40% deducted at source and have to reclaim almost all of that later.

I cannot think of any alternatives to the above options that would be workable in the short term. There was talk of a scheme to replace PAYE such that instead of employers calculating the tax and sending it to HMRC and the rest to the employee HMRC would do the calculation and make a deduction from the payee's bank account. Perhaps they are considering doing that for unearned income too.

ETA: From 2010 Conservative Policy re PAYE
http://www.telegraph.co.uk/news/election-2010/7273132/Tories-plan-biggest-shake-up-of-income-tax-system-since-Second-World-War.html

evenasus

RetiredInThailand wrote: »

Maybe they are finally going to scrap tax on savings interes

I wish!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

alanq

What next? Can we expect further "simplifications" to really upset the elderly?

The 25p pw to the over-80s that has not increased since it was introduced in 1971?

The £10 Christmas bonus that has not increased since it was introduced in 1972?

These payments are now worth less than 10% of what they were worth originally.

JoeCrystal

alanq wrote: »

What next? Can we expect further "simplifications" to really upset the elderly?

The 25p pw to the over-80s that has not increased since it was introduced in 1971?

The £10 Christmas bonus that has not increased since it was introduced in 1972?

These payments are now worth less than 10% of what they were worth originally.

Aye. according to one calculator, £10 from 1972 need to be £103 if to maintain same value in 2010. And 25p from 1971 need to be worth £2.76 as well.

Cheers

Joe