The 5% club

VfM4meplse

I've just seen Paul Lewis (of Moneybox fame) on TV saying that only 5% will have to pay tax on the interest earned on their savings, this represents those who have £80-100k plus in savings. It caught my eye as implementation was a topic I'd discussed earlier in the week. As someone who has submitted SA forms for 20 years now, I've always declared my interest and paid the marginal rate of tax on it, but am very aware that those on PAYE paying a higher rate of income tax not declaring their interest as additional income.

How does HMRC intend to deal with the 5% who don't complete an annual return? Not a judgement, just genuinely interested.

colsten

HMRC gets interest reported by all the institutions. How exactly they assign the correct amounts to the correct names without having a unique identifier (NI number) for all accounts, I don't know. Yet I am sure you can be certain they won't be letting people off who try to be smart in any way. Also, anyone can do a self-assessment which is a doddle if your only income is salary/pension and savings interest.

BTW, I did see Paul Lewis on TV as well this morning. He made a big spiel out of the fact that some people's tax code might be wrong because HMRC assumes too much savings interest. I am staggered that he didn't also provide the simple solution to this problem: people can just ring the HMRC, or fill in an online form, to get their tax code corrected if it is wrong. If you ring on a Saturday morning, it will take less than 10 minutes to get your tax code adjusted. I know because I have done it.

Dan83

You can get £1000 in interest with a lot less then £80k-£100k.

I'd guess a lot more then 5% of people will earn more then £1000 interest (unfortualy I'm not 1 of them ��)

£2000 @ 5% = £100 (TSB)
£5000 @ 4% = £200 (lloyds)
£6000 @ 3% = £180 (tesco)
£20,000 @ 3% = £600 (Santander)

Although after reading colsten post, I may of missed the point you are trying to make completely .

colsten

Paul Lewis was talking of savings in the purist sense, i.e. having money in savings accounts. Being selfish, I'd say it is just as well if he doesn't preach the current account approach, as banks will only tolerate so much of current accounts abuse for savings.

savings_my_hobby

I listen to money box on radio 4 and I don't think Paul Lewis is aware of the current account shuffle.

Or as Colsten said, he could be trying not to draw too much attention to it in case the banks get sick of the "abuse".

diamonds

VfM4meplse wrote: »

I've just seen Paul Lewis (of Moneybox fame) on TV saying that only 5% will have to pay tax on the interest earned on their savings, this represents those who have £80-100k plus in savings. It caught my eye as implementation was a topic I'd discussed earlier in the week. As someone who has submitted SA forms for 20 years now, I've always declared my interest and paid the marginal rate of tax on it, but am very aware that those on PAYE paying a higher rate of income tax not declaring their interest as additional income.

How does HMRC intend to deal with the 5% who don't complete an annual return? Not a judgement, just genuinely interested.

As a loss with the measure it will cost more to collect than not, same principle they treat multi-international evasion with :rotfl:

alternate

PAYE always accounted for interest anyway. As a higher rate payer my tax code often had an estimate for how much interest they expected I would earn - since the bank only used to deduct 20%. It would be listed as "other income" or some such - they claimed it was based on past years interest earned - and it was up to you to dispute it.

It will likely be more accurate now - after they get a few years of bank reports on your file - as I suspect most people didn't fill in a self assessment if the tax man had estimates too low.

diamonds wrote: »

As a loss with the measure it will cost more to collect than not, same principle they treat multi-international evasion with :rotfl:

Plus they will likely over estimate the interest on as many people as they under estimate. People generally don't check their new tax code that carefully. Will go some way to averaging out returns.

colsten

savings_my_hobby wrote: »

I listen to money box on radio 4 and I don't think Paul Lewis is aware of the current account shuffle.

Or as Colsten said, he could be trying not to draw too much attention to it in case the banks get sick of the "abuse".

He is well aware of it as it has been discussed with him on Twitter. I do not know his reasons for not promoting it, but I am quite happy that he doesn't.

savings_my_hobby

colsten wrote: »

He is well aware of it as it has been discussed with him on Twitter. I do not know his reasons for not promoting it, but I am quite happy that he doesn't.

If I used twitter i'd follow him.

VfM4meplse

savings_my_hobby wrote: »

I listen to money box on radio 4 and I don't think Paul Lewis is aware of the current account shuffle.

Or as Colsten said, he could be trying not to draw too much attention to it in case the banks get sick of the "abuse".

Its not abuse though - the products are there to draw customers in, and its up to the provider to offer us incentives to keep us loyal. Its the banks themselves that have created this, not the consumer.

colsten

VfM4meplse wrote: »

Its not abuse though - the products are there to draw customers in, and its up to the provider to offer us incentives to keep us loyal. Its the banks themselves that have created this, not the consumer.

None of the providers has offered us to use their current accounts exclusively as savings accounts but they tolerate it to some extent because they are still hoping to sell us other, profitable, products.

We have already seen significant limitations to the originally available terms - e.g. we were once allowed an unlimited number of 123 and FlexDirect accounts, and now it's severely limited. The more recent offerings started out with severe limitations on the number of accounts and the maximum amounts from the outset.

It is obvious that banks can only afford to pay promotional interest on a limited amount of deposited money. If it gets out of hand, they will simply remove or reduce the offers.