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April 2016 £1000 interest free
Comments
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In a word - MAYBE.
In 2016/17 it depends upon your marginal tax rate. If that is zero, then up to £6,000 of taxable savings interest will be taxed at zero percent. If it is basic rate, then it is up to £1,000. If it is higher rate then it is up to £500. If it is the additional rate then there is no relief.
Proof if proof were needed that there are no "in a word" answers in Mr. Osborne's world of "Tax Simplification"
Thanks for clearing that up - that makes sense.
I am still trying to work out how they are going to regulate it though - only obvious answer is self assessment....0 -
Thanks for clearing that up - that makes sense.
I am still trying to work out how they are going to regulate it though - only obvious answer is self assessment....
Through HMRC's own data gathering systems - which they believe will, independently of yourself, collect complete, perfect information of ALL your dealings - and present you with an assessment without any need for any input from you. What a hope!
https://www.gov.uk/government/publications/income-tax-simple-assessment/income-tax-simple-assessment0 -
The gross interest in a 123 is actually 2.96% so if you have it fully loaded at £20K (i.e. no room for interest to compound) then you'd earn £592 interest pre tax. However, the £5 monthly charge reduces that to £532 (albeit you can also benefit from cashback to offset this if you have qualifying DDs) which equates to 2.66% before tax (if applicable), and hence colsten's point about the number of other current accounts that beat it....Hi All,
I have a Santander account paying 3% AER.
At the moment you earn 3% but get taxed on it.
I have read somewhere that from April 2016 you can earn £1000 a year in interest without paying tax on it.
So, with 20k in the 123 account you would earn £600 a year in interest.0 -
A large proportion of the population won't get £1000 interest - so there's no regulation needed there.I am still trying to work out how they are going to regulate it though - only obvious answer is self assessment....
Most of the rest will already be doing self-assessment - nothing extra needed there either.
For those in the middle, a phone call or letter to HMRC may be sufficient to get their PAYE code adjusted.Eco Miser
Saving money for well over half a century0 -
Correct. The majority of people will not owe any tax on their interest and the banks will do you a favour by not withholding any.Thanks for clearing that up - that makes sense.
I am still trying to work out how they are going to regulate it though - only obvious answer is self assessment....
If you earn enough interest to pay tax on it - more likely for a higher rate taxpayer who is perhaps more likely to be doing a tax return anyway - you have to tell HMRC and pay up (in cash or by having an adjustment to your PAYE code going forward). Just as high rate taxpayers - who owe 40% but are only deducted 20% by the banks - do at the moment.
Banks have your name, date of birth and NI number and can report to HMRC on the amounts of interest they pay to you over the course of a year. So, while HMRC will not be working out everybody's grand total interest for them and sending you a demand for what you owe from your umpteen bank accounts, you are expected to know what you have been paid and own up to it. They can certainly pick on anyone they please and check whether what (if anything) you reported via self assessment was in any way consistent with what the banks said they paid you.
It fits neatly into the UK concept of a self assessment of taxes owed and the to-be-implemented-in-due-course online running tax accounts.
At the moment, base rates are on the floor but high interest current accounts like the Santander ones pay a big multiple of the base rates to attract customers. As the base rates rise, the premiums that banks pay over base rate will probably fall a bit and so people's interest incomes will not rise too fast. But in the long term when we have a generally higher level of interest rate in the country we will probably find more people tipping over into the range where they need to declare income and pay tax on some of the income they've been getting.0 -
The gross interest in a 123 is actually 2.96% so if you have it fully loaded at £20K (i.e. no room for interest to compound) then you'd earn £592 interest pre tax. However, the £5 monthly charge reduces that to £532 (albeit you can also benefit from cashback to offset this if you have qualifying DDs) which equates to 2.66% before tax (if applicable), and hence colsten's point about the number of other current accounts that beat it....
Most of the other accounts from what Ive noted pay higher interest rates but limit the amount you can earn it on - ie Lloyds are doing 5% on balances up to £2500 - so about £125 a year.
The 123 account is the only one I could find that pays 3% on 20k. Anything without a limit seems to pay between 1 and 1.5% when I checked last time.
Do you have any examples as I'd be intrigued to see how they measure up?
Perhaps I am just thinking about it the wrong way.0 -
So will all interest earned on all savings accounts be paid gross with effect from 5th April 2016? Is that right?
If so, GREAT!Stopped smoking 27/12/2007, but could start again at any time :eek:0 -
Examples are littered across this forum and discussed all the time. The first post on the "what is the highest interest rate you can get" thread which is on the front page at the moment is regularly updated and lists all the main ones.Most of the other accounts from what Ive noted pay higher interest rates but limit the amount you can earn it on - ie Lloyds are doing 5% on balances up to £2500 - so about £125 a year.
The 123 account is the only one I could find that pays 3% on 20k. Anything without a limit seems to pay between 1 and 1.5% when I checked last time.
Do you have any examples as I'd be intrigued to see how they measure up?
You are right, if you can keep your balance in the £3k-£20k range the 123 account is very useful because you get all the money in one place and the rate is decent. However, if you had £20k you could put most of it in other accounts (like Lloyds which pays 4% on £5k and probably Nationwide is the one you are thinking about paying 5% on £2.5k, so that you would have several accounts open before you started putting significant amounts in Santander, and so you could receive more total interest on your £20k, even after fees.
You are also right that accounts paying premium rates are restricted on what they will pay out, so that those banks don't get taken to the cleaners by people with a lot to deposit. However, particularly if you have a partner, by the time you have a joint account and each have as many individual accounts as you are allowed and you start to fill up the various 'regular saver' accounts with your other spare money, you can get a lot stashed away at a pretty high blended average interest rate.
If you can be bothered with setting it all up.
Yes.So will all interest earned on all savings accounts be paid gross with effect from 5th April 2016? Is that right?
If so, GREAT!0 -
That's Nationwide.Most of the other accounts from what Ive noted pay higher interest rates but limit the amount you can earn it on - ie Lloyds are doing 5% on balances up to £2500 - so about £125 a year.
You are:The 123 account is the only one I could find that pays 3% on 20k. Anything without a limit seems to pay between 1 and 1.5% when I checked last time.
Do you have any examples as I'd be intrigued to see how they measure up?
Perhaps I am just thinking about it the wrong way.
You are thinking about a bank account, you should be thinking about many bank accounts.
All the worthwhile ones are listed in the first post here:
https://forums.moneysavingexpert.com/discussion/5374614Eco Miser
Saving money for well over half a century0 -
HMRC are already seeing all the interest you get paid. And they are sharing the information with other countries if required. Google European Savings Directive, for example.Through HMRC's own data gathering systems - which they believe will, independently of yourself, collect complete, perfect information of ALL your dealings - and present you with an assessment without any need for any input from you. What a hope!
This does not relieve anyone off their duty to declare their taxable income properly.0
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