How much Tax will be on £250,000?

ChocolateLover_3

Am getting £250,000 soon
If I put this into a normal saving account ,how much would I be taxed on it ?
I am a non tax payer at the moment and live on Disability benefits ,
Thanks in advance
Choccy.

Aegis

If you were in a normal savings account at 6.3%, you would have £15,750 in interest, which would presumably be taxed at the basic rate of 20%, meaning you'd pay £3,150 in tax and keep £12,600 per year.

RayWolfe

Not quite true. You have a personal tax free allowance each year and some of the interest may be taxed at 10%
The exact amount of tax you will pay depends upon how much other taxable income you have.

Aegis

I had been assuming that the disability allowance would take the OP into the basic tax rate. Fair point though!

ManAtHome

10% rate ends after this tax year though.

Stompa

ManAtHome wrote: »

10% rate ends after this tax year though.

I don't think that's the case. As far as I'm aware the 10% band will be retained for savings interest.

YorkshireBoy

ManAtHome wrote: »

10% rate ends after this tax year though.

I thought it was being retained for savings interest?

In a complex set of changes, Brown has swept away the 10% tax band on pension and earned income from April 2008, but retained it for savings.

Source: Daily Mail (Sorry, but it was the first hit returned from a google search!)

ManAtHome

Blimy, you're both quite correct (just searched, rather than read GB(H)s ramblings), although presumably you have to be taxed by the bank and reclaim (certainly with £250k you'll have to).

ChocolateLover_3

So would it be 20% or 10% am a bit confused now ?
I have no other income apart from the disability
Choccy.

jamesd

Assuming that you're getting disability living allowance that is not taxable income.

So, assuming this is not taxable, you will be due to pay no tax on the first 5225 of interest, 10% on the next 2150 and 20% on the rest. The savings account will probably pay tax at 20% and I expect that a call to your local tax office will get you instructions for reclaiming the overpaid tax.

It's really a bad idea to put it all into a savings account, since it'll decrease in value due to inflation if you take any significant income from it. Better would be a mixture of unit trusts and OEICs in a range of areas, perhaps investing monthly over the next 12-24 months. If well invested this could be expected to pay 3.5% of the total in income, grow the capital and income with inflation so you don't get poorer over time and quite likely grow by an extra 5% or so a year on average.

chesky369

And don't forget ISAs