Premium Bonds - Loss of tax free status

bangon

Hi, I've heard rumours that Premium Bond Prizes will no longer be tax free from 1st April 2016 as part of George Osborne's much trumpeted 'Savings Revolution' - whereby he and others (including MSE's own Martin lewis) have been crowing about how Savings will be 'tax free' for all bar the super rich'.
Is it true that all prizes over £500 for higher rate tax payers and £1,000 for basic rate tax payers, will become liable for tax at the individuals marginal rate after 1st April 2016?

If so - - expect a mass exodus as the vast majority of the £59Billion is withdrawn!!!

bigfreddiel

Complete cobblers!

fj

taylornj

The £1000 and £500 is the Personal Savings Allowance for zero or basic rate tax payers and higher rate tax payers, you missed the £0 for additional rate tax payers.

It's an allowance of how much savings interest above an income of £16000 (in 2016/17 tax year) you can earn tax free. That is £11000 personal allowance plus a £5000 savings allowance which is also tax free.

Premium bonds are not savings there is no interest and should not be confused with savings or the prizes from holding bonds as interest on savings.

There are types of bond which do pay interest and these would classed as saving interest but not Premium Bonds.

kidmugsy

bangon wrote: »

Hi, I've heard rumours that ...

Change your pub.

bangon

This article may make you all think differently??

Manually paste this weblink below (prefix with www)

lovemoney.com/news/50729/premium-bonds-get-worse-savings-allowance-prize?source=10000277&utm_source=newsletter

cloud_dog

bangon wrote: »

Hi, I've heard rumours that Premium Bond Prizes will no longer be tax free from 1st April 2016 as part of George Osborne's much trumpeted 'Savings Revolution' - whereby he and others (including MSE's own Martin lewis) have been crowing about how Savings will be 'tax free' for all bar the super rich'.

Seriously?

From your very own article link you extrapolate the above.

How on earth do you get from the article's perspective; which basically implies that the benefit of holding Premium Bonds will be reduced due to the £1000 / £500 new Personal Savings Allowance to Premium Bonds no longer being tax free.

Seriously, I don't get it. Have you tried re-reading your own article (very slowly).

planteria

i haven't looked at the article, but the point will not be that PBs are to change. the point will be that the appeal of other savings accounts will increase due to the interest they generate being paid free of tax to most savers.

bangon

Why do some people feel they have to always patronise and insult? This was a genuine post to try and qualify this point:

'Will everyone (regardless of income) have to pay at least 20% tax on all Premium Bond prize winnings that exceed £1,000 after April 1st when the new Personal Savings Allowance rules kick in'?

If you accept the premise that ALL premium bond prizes are in fact paid out of interest on all the deposits (which is how the prizes are paid @1.35% currently) - The main point of the article is that the 'Tax free status' will be removed.

If you're lucky enough to win a big prize - all my point is you will then have to pay tax at your marginal rate on it (if the article is correct) - which will certainly detract for me at least - their usefulness in a wider savings portfolio.

Drp8713

The article doesnt say that.

Premium Bonds do not pay interest, they pay prizes which are, and will remain, tax free.

What the article was saying is Premium Bonds pay an average of 1.35% across all of the bonds, but most people will get a worse rate than that. If you are a higher rate tax payer now you would need 2.25% easy access to get 1.35% net of tax and PBs therefore serve a purpose.

Afer April everyone gets a personal savings allowance and this means that you only need 1.35% easy acess to get 1.35% interest up tp £500/£1000 depending on your tax rate. PBs therefore look less attractive.

But who cares, im feeling lucky.

slowpoke_rodriguez

bangon wrote: »

If you're lucky enough to win a big prize - all my point is you will then have to pay tax at your marginal rate on it (if the article is correct) - which will certainly detract for me at least - their usefulness in a wider savings portfolio.

Read it again, slowly. You really have got the wrong end of the stick.

colsten

bangon wrote: »

The main point of the article is that the 'Tax free status' will be removed.

That's totally wrong, the article doesn't state that at all.

What it says is "As a result, one of the big attractions of Premium Bonds – the tax-free returns – will be lost."

That means that the attraction will be lost, as PBs will no longer be the only place (apart from ISAs) where the return is tax free. The article doesn't say anywhere that PB prizes will become taxable.