MSE News: Budget'15: Savers to get up to £1k personal allowance before interest taxed

Just_landed

talexuser wrote: »

No impact, the 5 grand is only available if your total income is less than your tax allowance. The 1 grand is available to all basic rate taxpayers?

That's me.
:beer: I live in the real world.

jamesd

Spidernick wrote: »

So dividend income doesn't count as 'savings' by the looks of it? Are these to be taxed as normal, does anyone know?

For the Budget 2014 changes dividends were not included but these were:

"What counts as savings income?
This includes interest from savings accounts you hold with banks, building societies and other account providers, such as credit unions. It also includes interest distributions from authorised unit trusts and open-ended investment companies and income which is not interest, such as the profit on government or company bonds which are issued at a discount or repayable at a premium. Other types of savings income include purchased life annuity payments and gains from certain contracts for life insurance."

For the funds you need to check whether the distribution is interest or dividend, it could be either if the fund holds bonds, depends on the bond/dividend mix.

I haven't seen anything in the Budget 2015 documents that is more explicit about what the new allowance includes.

Spidernick wrote: »

Also, if the interest is tax-free, is it then ignored for the purposes of 'income' for the child benefit claw back calculation for income over £50K?

Like the personal allowance I've seen no sign at all that this is income is disregarded for that purpose, but me seeing no sign isn't the same as a definitive yes/no from an official source.

BeansOnToast_2

If my earned income is £600 below the 40% threshold and my interest income is £1000 (pretty close to my actual situation actually), will that take me into the40% band and so reduce my tax free income allowance to £500?

TomJ

Question: How will this effect Halifax's Reward Current Account? The fiver a month isn't interest per se, and is paid net at the moment. Will it remain taxable, will it go up to 6 quid a month or will HBOS pockect the pound that's currently going to HMRC?

System

How has "savings" come to mean only money that earns interest?

Savings are surely capital you have put aside out of income and not spent?
Why is money saved and invested in shares not "savings"?
Why is money you have inherited and put in a bank account called "savings"?

SAHD_Jim

TomJ wrote: »

Question: How will this effect Halifax's Reward Current Account? The fiver a month isn't interest per se, and is paid net at the moment. Will it remain taxable, will it go up to 6 quid a month or will HBOS pockect the pound that's currently going to HMRC?

My guess would be that if it isn't interest it won't be treated as such in these rules, just like dividends

General_Grant

BeansOnToast wrote: »

If my earned income is £600 below the 40% threshold and my interest income is £1000 (pretty close to my actual situation actually), will that take me into the40% band and so reduce my tax free income allowance to £500?

Well,with those figures, you would already be a 40% tax payer in the current year. Your "earned" and "unearned"/interest income is combined.

SAHD_Jim

General_Grant wrote: »

Well,with those figures, you would already be a 40% tax payer in the current year. Your "earned" and "unearned"/interest income is combined.

yep, BeansOnToast would be taxed at their marginal rate and once the interest is added to earned income the marginal rate is HRT. They could choose to make a small pension contribution to bring them under the HRT threshold which would then mean they would get the £1000 allowance rather than £500.

[Deleted User]

If the banks do not take the tax off the interest at the basic rate as they do now, isn't the HMRC going to see more tax dodging as people forget to declare their tax due on interest paid?

Or are all savers going to have to complete a tax return?

Or are the banks to take off the tax, and then you claim it back via your annual tax return?

SAHD_Jim

gsmlnx wrote: »

If the banks do not take the tax off the interest at the basic rate as they do now, isn't the HMRC going to see more tax dodging as people forget to declare their tax due on interest paid?

Or are all savers going to have to complete a tax return?

Or are the banks to take off the tax, and then you claim it back via your annual tax return?

Banks will no longer collect any tax.

Firstly Gideon claimed that something like 95% of people will be taken out of tax on interest altogether with this proposal, so the issue is really on the 5% of people who would owe tax under the new arrangements. My guess is that many of those in the 5% will already be people who submit a tax return and as with any untaxed income it is the responsibility of the taxpayer to pay their tax or face the consequences.

I have heard suggestions of banks collecting NI numbers etc for HMRC, and that is how it presently works for gross interest recipients like me, but I suspect this would be false economy and the government will simply put the onus on the taxpayer.

If there is suspicion that people are tax dodging, I am sure it will be revisited.