New Tax Rules on Savings

greenglide

You are contributing £2,880 (equal to £3,600 after the tax releif) every year, aren't you? You get the £720 tax relief absolutely free.

If you do not expect to pay tax on your pension it will never be taxed!

RG2015

Gollygumdrops wrote: »

RG2015

It is a 1 year fixed rate with Shawbrook - opened two weeks ago.
They have since pulled it but now offer a 1.8% 1 year fixed.

Thanks. I hadn't realised that 1 year fixed rate bonds had rates this high. As I would exceed £1,000, I have only been monitoring fixed ISAs the best of which is about 1.2%.

It's got me thinking though that 1.8% less 20% tax is 1.44%. Alternatively, my non tax paying wife may have another windfall coming her way.

soulsaver

RG2015 wrote: »

Thanks. I hadn't realised that 1 year fixed rate bonds had rates this high. As I would exceed £1,000, I have only been monitoring fixed ISAs the best of which is about 1.2%.

It's got me thinking though that 1.8% less 20% tax is 1.44%. Alternatively, my non tax paying wife may have another windfall coming her way.

Al Rayan Bank UK, FSCS covered, 12 mth Fixed rate 2.02%
18mth 2.06%

https://www.alrayanbank.co.uk/savings/fixed-term-deposits/12-month-fixed-term-deposit/

arsty

thank for sharing such an interesting topic

Dazed_and_confused

Gollygumdrops

This isn't quite true

My husband works full time and is a higher rate tax payer so can only get £500 per year on savings before having to declare to tax office.

Strictly I think he needs to declare it irrespective of the amount if it means he has more tax or Child Benefit to pay back which can happen for any amount of interest in a variety of circumstances.

For example if he is earning £100,000 salary and has £200 interest he will have a higher tax bill because the £200 interest means he would lose some of his personal allowance.

The £500 is not always a tax free amount

Gollygumdrops

Dazed and confused

Not strictly sure what you are getting at. Are you saying that anyone who earns over £100,000 is not allowed £500 interest on their savings?

Most of the savings are in my name, as I am not earning, but would like clarification of what entitlement my husband has!

AndyT678

Anybody earning between £45,001 and £150,000 is has £500 personal savings allowance but any earnings over £100,000 will reduce their personal allowance of £11,500 by £1 for every £2 earnt over £100,000.

Malthusian

He's talking about the personal allowance (the £11,500) not the personal savings allowance (£1,000 / £500).

If you earn over £100,000 you lose £1 of your personal allowance for every £2 you are over.

Effectively this means there is a 60% tax band between £100,000 and £123,000. On every pound you earn within this band you lose half a pound in personal allowance, on which you then have to pay 40% tax, plus you have to pay 40% tax in the usual way. 1/2 * 40% + 40% = 60%.

polymaff

Gollygumdrops wrote: »

Dazed and confused

Not strictly sure what you are getting at. Are you saying that anyone who earns over £100,000 is not allowed £500 interest on their savings?

Most of the savings are in my name, as I am not earning, but would like clarification of what entitlement my husband has!

The threshld for losing the £500 PSA is the Additional Tax Rate threshold, currently £150,000. Incidentally, not "earns" but "has taxable income"

eskbanker

AIUI, dazed and confused's point was that the savings interest income does need to be declared even if below £500, because it may affect the taxpayer's overall tax bill.

It's not like ISAs where they're completely tax-free, the Personal Savings Allowance is actually taxable income that happens to be taxed at 0%, and in certain circumstances (e.g. close to thresholds at £45/100/150K) savings income that is within the PSA limit can still increase the tax payable and therefore it should always be declared.