Tax on Savings Interest

BACKTOBACK

Currently in a situation where i have a low income but large savings.
My yearly taxable income is currently approximately £7155.00
I have around £210,800.00 in a chase savings account (recently opened) which pays a taxable interest rate of 1.5%
I believe i would be entitled to the savings interest tax free due to my low income?
Please could someone help advise how this would work as i have not yet had my first statement from Chase bank.
Will Chase bank deduct tax from my interest payments each month?
Will I have to wait until the end of the financial year to reclaim the tax paid?
Is there any way to get the savings interest tax free from Chase bank?

eskbanker

Chase won't deduct tax from your interest, so no further action needed on that front.

Having said that, it isn't a good idea to exceed the FSCS protection limit by such a wide margin, so you might wish to consider splitting your pot into smaller chunks, and/or even investing some....

Bigwheels1111

No tax taken, your income plus savings interest should be about £10,317.00.
So take off the tax free savings allowance of £1000.
Leaving £9317.00.
As this is below your tax code of £12500. You will pay nothing in tax and nothing to reclaim.

eskbanker

Bigwheels1111 said:

No tax taken, your income plus savings interest should be about £10,317.00.
So take off the tax free savings allowance of £1000.
Leaving £9317.00.
As this is below your tax code of £12500. You will pay nothing in tax and nothing to reclaim.

That's not how it actually works - if total income is below the personal tax allowance of £12,570 then the personal savings allowance doesn't come into play (and is a nil-rate band of taxable income anyway, rather than literally a tax-free allowance), but the net result is the same, i.e. no tax to pay!

Bigwheels1111

eskbanker said:

Bigwheels1111 said:

No tax taken, your income plus savings interest should be about £10,317.00.
So take off the tax free savings allowance of £1000.
Leaving £9317.00.
As this is below your tax code of £12500. You will pay nothing in tax and nothing to reclaim.

That's not how it actually works - if total income is below the personal tax allowance of £12,570 then the personal savings allowance doesn't come into play (and is a nil-rate band of taxable income anyway, rather than literally a tax-free allowance), but the net result is the same, i.e. no tax to pay!

I know it’s just a basic working out.
I’m in the same situation low income large savings.
I will be on cloud nine if interest rates go up to 4%.
Would not need to work. 😜

BACKTOBACK

eskbanker said:

Chase won't deduct tax from your interest, so no further action needed on that front.

Having said that, it isn't a good idea to exceed the FSCS protection limit by such a wide margin, so you might wish to consider splitting your pot into smaller chunks, and/or even investing some....

The money is from an inheritance so i think its protected for six months. Then will move some out

Daliah

eskbanker said:

Bigwheels1111 said:

No tax taken, your income plus savings interest should be about £10,317.00.
So take off the tax free savings allowance of £1000.
Leaving £9317.00.
As this is below your tax code of £12500. You will pay nothing in tax and nothing to reclaim.

That's not how it actually works - if total income is below the personal tax allowance of £12,570 then the personal savings allowance doesn't come into play (and is a nil-rate band of taxable income anyway, rather than literally a tax-free allowance), but the net result is the same, i.e. no tax to pay!

The total income is not likely to be below £12,570 though, as the OP says they have an income of £7,155. It obviously depends on how long they will be keeping the money in Chase (or other savings account).

If the total income is below £17,570, they might be eligible for the starting rate for savings . If not, they will get £1,000 of the savings interest tax free, and the rest will be taxable at 20%.

In common with other banks, Chase will not deduct tax but will report the interest payments to the HMRC. OP can discuss with the HMRC whether to pay the tax due in a lump sum, or have it deducted through their PAYE code. https://www.gov.uk/apply-tax-free-interest-on-savings

Albermarle

I have around £210,800.00 in a chase savings account (recently opened) which pays a taxable interest rate of 1.5%

The tax issue is marginal compared to the loss in value you will see due to inflation . With inflation at maybe 8.5% and your savings only earning 1.5% , then in 12 months time they will be worth only around £195K , tax or no tax .

You need to consider a longer term plan for this large amount of money .

BACKTOBACK

My longer term plan is to buy a house. But i am not rushing. It might take 2 months or 12 months to find the right property.
I am worried about inflation.
I am open to any better investment ideas considering i would need quick access to the money?

Bravepants

BACKTOBACK said:

My longer term plan is to buy a house. But i am not rushing. It might take 2 months or 12 months to find the right property.
I am worried about inflation.
I am open to any better investment ideas considering i would need quick access to the money?

If you intend to use the money in less than 5 years then stick to savings not investments.

eskbanker

BACKTOBACK said:

My longer term plan is to buy a house. But i am not rushing. It might take 2 months or 12 months to find the right property.
I am worried about inflation.
I am open to any better investment ideas considering i would need quick access to the money?

If you're buying within a year then that really isn't a longer term plan as such, and realistically you have no chance of beating inflation over that sort of timeframe, so just use the best-paying easy access accounts to minimise your (real-terms) losses....