Amount of Tax on Savings

Jupiter55

Good Afternoon Everyone
Just a quick question , 
Based in Scotland
Just into higher tax bracket of 41% so I can earn £500 before I pay tax

my question is - apologies for the stupidity of it      - Do I pay 41% on all of any interest above the £500.

If so then whats the point of  anyone saving if your giving nearly half your interest to the tax man.

thanks

eskbanker

Yes, savings interest is taxed at your marginal rate, so if you're in the fortunate position of earning enough to reach higher rate tax, while also holding enough in savings to exceed your reduced allowance, then yes, you should accept that you're in the top x% and therefore should be prepared to shoulder your fair share of the country's tax burden.

On the other hand, there are various strategies to minimise tax liability, ranging from using ISAs to contributing to pensions by sacrificing some salary to drop you below the higher rate threshold....

Jupiter55

Thanks again Eskbanker

Dazed_and_C0nfused

Jupiter55 said:

Good Afternoon Everyone
Just a quick question , 
Based in Scotland
Just into higher tax bracket of 41% so I can earn £500 before I pay tax

my question is - apologies for the stupidity of it      - Do I pay 41% on all of any interest above the £500.

If so then whats the point of  anyone saving if your giving nearly half your interest to the tax man.

thanks

The Scottish government does not have the right to set the rates for savings and dividend income so you cannot pay 41% on the interest.

This is taxed at the rates applicable to the rest of the UK so
First £500 taxed at 0%
Above £500 taxed at 40%

macman

You can still save £20K tax free each year in an ISA, plus £4K in a LISA, if you qualify for that too.

eskbanker

macman said:

You can still save £20K tax free each year in an ISA, plus £4K in a LISA, if you qualify for that too.

Not £20K plus £4K, the LISA contributions count towards the overall ISA limit, so if you pay £4K into a LISA, that leaves £16K for other types of ISA....