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tax rate for 'non-ISA saving account interest'

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starkiwi26
starkiwi26 Posts: 108 Forumite
First Anniversary Name Dropper Combo Breaker First Post
edited 20 January 2016 at 12:24PM in Savings & investments
thanks to MSE, i have Halifax account and Santender 123 account.
this give me
Halifax - £5/month (tax free)
Santender - 3% interest (interest 2.4% after tax)

this had been going good for about 6 months, and i started to feel this is incorrect.
my tax code 1060L
£45385 annual income (this is not real figure, but as an example)
£10600 tax free allowance

so, i should be paying
first £31785 as basic tax (20%)
then £3000 as higher tax (40%)

so, i should be paying higher tax for my saving also??
Halifax - £5/month [STRIKE](tax free) [/STRIKE](40% tax, £3/month after tax?)
Santender - 3% interest [STRIKE](interest 2.4% after tax)[/STRIKE] (40% tax, interest 1.8% after tax?)

am i correct?

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  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
    Name Dropper First Post First Anniversary Combo Breaker
    edited 20 January 2016 at 8:30PM
    Options
    yes, you should pay more tax, but
    Halifax - £5/month net of 20% tax = £6.25 gross, £3.75 after 40% tax,
    or £60, £75, £45 per year.

    It's up to you to declare the interest and pay the extra tax, the bank won't take it.

    Note that from April, you get £500 interest tax-free - that does not include the Halifax reward, which is not interest.
    Eco Miser
    Saving money for well over half a century
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