Paying Tax on interest

bowlhead99

DennisTenus wrote: »

I do have a little bit in P2P but I'd still pay tax on the interest wouldn't I?

Yes, you have to pay tax on your interest income. The point is presumably the same as the one I made at the beginning, in that it can be better as a net result to earn higher rates of interest and pay your income taxes on them, than get low rates of interest and think "Hurrah, no taxes to pay".

Obviously P2P has risk, which you don't have with a deposit account or National Savings product like premium bonds, and only you can decide whether you feel the risk/reward ratio is worth it.

Don't have one

If you want one, you could perhaps attract one by spending some of your money on one, though the amount spent is not guaranteed to be proportionate to the quality you get.

Confused?! You mean spend it basically?

You already have 16 accounts overflowing and are looking for something to do with new spare money that you have, to ensure it doesn't cause you to pay more tax. Buying goods, services, property or investments are all valid uses of your money unless you have a specific objective of building up more and more cash on deposit.

As cash in premium bonds is only likely to pay you a little over 1% a year (albeit no tax to pay) and cash ISAs below 1.5% for instant access products, maybe at some point you could consider whether such products are really going to improve your lot in life (given rates of inflation etc) when you already have substantial cash reserves. For someone with all the high rate accounts maxed out, a longer term view might lead themhat might lead you to investments, whether in ISAs or pensions, with the latter giving great tax breaks if you can wait until later life to cash in.

Obviously that doesn't help if you are saving for an imminent house deposit or something, but "spend or invest it" is a standard solution for someone whose problem is too much cash hanging around creating large amounts of taxable interest.