0% Starting Rate For Savings

[Deleted User]

ETIENNEG - To address your question, I'm afraid to say that there is no real answer. It's a fact of life - there's simply no fairness, which is what I think you're trying to say. Especially when it comes to taxation. There are many such anomalies- the higher up you are in the social ladder, the more opportunities there are for your further advancement.

etienneg

[quote=[Deleted User];75591490]ETIENNEG - To address your question, I'm afraid to say that there is no real answer. It's a fact of life - there's simply no fairness, which is what I think you're trying to say. Especially when it comes to taxation. There are many such anomalies- the higher up you are in the social ladder, the more opportunities there are for your further advancement.[/QUOTE]

lindabea - Thanks for your contributions here. The answer above is pretty much what I expected to read, to be honest. Another contributor talked of a political dimension, which is a similar way of putting it. It's just that there are many things about taxation that I don't know, and I wanted to avoid making a sweeping assumption because of my own ignorance. I don't have an agenda for campaigning or protesting or anything like that.

Dazed_and_confused

There are a lot of oddities with the current income tax rates and allowances!

In 2019:20 an employee (not resident in Scotland for tax purposes) could be slogging their guts out for 40 hours a week to earn £23,833

They will contribute £2266.60 tax as a result.

But a similar working age person who is lucky or clever enough to be able to ensure their income is sourced in a particular fashion might decide to work in the same job but just for half a week and supplement their wages with interest and dividends. If they are fortunate enough to also be the recipient of Marriage Allowance they could end up with total taxable income of £23,833 as well. But will have to pay tax of exactly £0.00.

It is often said savings (and therefore the interest) comes from income originally taxed as earnings but someone earning within their Personal Allowance and paying no tax is just as entitled to save (if they can afford to) as everyone who pays tax. So it isn't always ending up coming from taxed income.

polymaff

[quote=[Deleted User];75591437] I do not see anything where Etienneg is saying that interest derived from taxed income is untaxed. [/QUOTE]


Oh, no? Where has he made it clear around the quotes below that he is only referring to interest that is NOT "derived from taxed income"

etienneg wrote: »

However, I fail to see why he should not be taxed when A is.

...

etienneg wrote: »

Person B has huge savings that produce £16,850 interest and earns nothing. He will pay no tax.

Look, there are plenty of incensed people in the world nowadays, the sort of folk who yell at the TV. The trouble with MSE is that it answers back.

I've given a detailed, structured argument as to why savings funded out of taxed income - which I'm sure you will agree represents the overwhelming majority of savings - should not be treated as generating untaxed income.


The logical thing now would be for etienneg to counter my argument.

[Deleted User]

polymaff wrote: »

Oh, no? Where has he made it clear around the quotes below that he is only referring to interest that is NOT "derived from taxed income"


...



Look, there are plenty of incensed people in the world nowadays, the sort of folk who yell at the TV. The trouble with MSE is that it answers back.

I've given a detailed, structured argument as to why savings funded out of taxed income - which I'm sure you will agree represents the overwhelming majority of savings - should not be treated as generating untaxed income.


The logical thing now would be for etienneg to counter my argument.

Polymaff - a detailed structured argument :rotfl: I don't think anybody is saying that interest from savings should be untaxed; this is why I think you're going off at tangents.
All income should be taxed no matter how it is earned. But the current system is somewhat unfair to those who are unfortunate enough not to have savings/investments so that they can benefit from additional tax allowances

polymaff

[quote=[Deleted User];75592097]Polymaff - a detailed structured argument :rotfl:[/QUOTE]

What a shame you insult the individual rather than debate the issue.

[quote=[Deleted User];75592097] I don't think anybody is saying that interest from savings should be untaxed[/QUOTE]

The Chancellor of the Exchequer for one - or where did the Starting Rate for Savings and the Personal Savings Allowance come from?

[quote=[Deleted User];75592097]All income should be taxed no matter how it is earned[/QUOTE] So you are in favour of getting rid of the Personal Allowances, ISAs, Premium Bonds etc.?

[quote=[Deleted User];75592097] But the current system is somewhat unfair to those who are unfortunate enough not to have savings/investments so that they can benefit from additional tax allowances[/QUOTE]

"additional tax allowances" which would contradict your "All income should be taxed"?

Just how would you reconstruct the Income Tax system?

etienneg

polymaff wrote: »

I've given a detailed, structured argument as to why savings funded out of taxed income - which I'm sure you will agree represents the overwhelming majority of savings - should not be treated as generating untaxed income.

The logical thing now would be for etienneg to counter my argument.

To be honest, I cannot find this "detailed, structured argument". What I have found are some (to me at least) vague generalities that I admit I cannot fathom. So I'm not in a position to "counter your argument".

From what I have managed to piece together (if I have understood correctly - please correct me if this is wrong), you think that interest on savings derived from taxed income should never be taxed as it is not (untaxed) income. Well, rightly or wrongly that's not the position in our tax system, which doesn't look at the source of the savings and treats savings interest as taxable. So, the 0% savings starting rate is an exception.

My starting point was our tax system as it is, and my comparison between A and B was there so as to ask about the basis of the exception. Your argument appears to be that savings interest shouldn't be treated as income anyway, so there should be no need for an exception. This is a completely different question, which is why I have been saying that your point is irrelevant to MY question.

If I have understood your position correctly, you are (of course) perfectly entitled to hold this view. However, it is not a view that I am interested in supporting or countering. If you or others want to post further on it, that's fine, but I do not.

If I have misunderstood your position, that's different, and I'm sorry that I have failed to grasp what you have been saying. Should you wish to attempt further explanation, I will certainly read your posts and try to follow your argument.

polymaff

etienneg wrote: »

So, the 0% savings starting rate is an exception

In what way(s)?

etienneg

polymaff wrote: »

In what way(s)?

Most savings interest is taxable. Without the 0% savings starter rate this (up to) £5,000 would be taxable along with the rest. That's what I call an exception. Would you prefer some other term?

londoninvestor

uknick wrote: »

I think the fact the announcement was made in the run up to an election was a pure coincidence

Likewise the fact that pensioners are more likely to turn up and vote at elections... (84% of over-70s voted in the last general election, compared to 69% of the adult population as a whole.)