Tax rate savings

musashi10

Hi my wages are 40k/year. I was wondering what rate of tax I would have to pa on any savings account I had that wasn't wrapped in an isa?

I ran an oline calculator and it said on a 3% account I would pay 1.8% that seemed too high to me

VT82

1.8% is the rate you will get on your savings, rather than what you will be paying in tax. So 1.2% is what you will be paying in tax, i.e. 40% of 3%.

Note that you will actually be paid at a rate of 2.4% by your savings provider, i.e. net of 20% tax. It will be up to you and HMRC to sort out the other 20%.

Lokolo

Assuming your personal allowance is 944L (so £9440) then you would need to earn £41,450 before you are in the higher rate tax band.

You would pay 20% tax on any interest.

Assuming your salary is exactly £40k and you don't earn over £1450 in interest.

musashi10

Thanks so I would pay 0.6% tax of the 3% leaving me with 2.% interest?

Yes my wage is exactly 40k but that will go up slightly in Jan

musashi10

Just suppose I earnt 2k would that mean that all savings would be taxed a higher rate? or only that proportinate to the amount I am over the higher tax threshold?

dzug1

Only the excess would be taxed at a higher rate.

The bank would not take tax at the higher rate - you would have to make arrangements with HMRC to pay it yourself.

talexuser

If you tax code is 944 then you can earn 9440 + 32010 = 41450 at 20 % tax.

If you tax code is something else "X" you can earn "X" *10 + 32010 at 20 % tax.

Any amount OVER the addition totals above is taxed at 40%.

Gross salary + any taxable gross interest is your total income for the calculation.