Tax on interest earned from savings

NOVAMET21

So, interest earned from cash ISA is tax free but interest earned from other savings are not tax free.

I'm not sure when don't the Government tax us. As I'm a higher tax payer, I can only earn 500 per year tax free in non ISA savings account.

Are there other options where we can save and not pay tax?

Thanks

Tom_Hendo

NS&I Premium bonds, though its not a guaranteed return, its a prize draw

Bigwheels1111

Get your other half to save it in their name ?.

Dazed_and_C0nfused

NOVAMET21 said:

So, interest earned from cash ISA is tax free but interest earned from other savings are not tax free.

I'm not sure when don't the Government tax us. As I'm a higher tax payer, I can only save 500 per year tax free in non ISA savings account.

Are there other options where we can save and not pay tax?

Thanks

Not at all, you can save far more that as the tax rules relate to the interest earned, not the amount saved.

And it isn't tax free, it's taxed at 0%.  Might not make any difference to some people but for those that are liable to the High Income Child Benefit Charge, entitled to Married Couple's Allowance or have adjusted net income > £100k it can add to your overall tax liability even though the interest itself is taxed at 0%.

NS&I premium bonds are tax free although your personal return is down to luck.

NOVAMET21

Tom_Hendo said:

NS&I Premium bonds, though its not a guaranteed return, its a prize draw

How do I apply for it?
Also, is the withdrawal unlimited?

Dazed_and_C0nfused

https://www.nsandi.com/products/premium-bonds

Tom_Hendo

NOVAMET21 said:

Tom_Hendo said:

NS&I Premium bonds, though its not a guaranteed return, its a prize draw

How do I apply for it?
Also, is the withdrawal unlimited?

Go to google, type in NS&I Premium bonds, click the link, follow instructions.

The draw happens at the very start of the month, for all money held for the entire previous month. So its best to open and fund the account right at the end of a month. 

It is unlimited withdrawals, but it takes 3 days for you to receive your money. Also money withdrawn does not qualify for the next prize draw, but you can tell the system to only withdraw it after the draw, which means you get the money in the first 5 days of a month. 

Prizes are not taxed.

Imvrasos

Dazed_and_C0nfused said:

NOVAMET21 said:

So, interest earned from cash ISA is tax free but interest earned from other savings are not tax free.

I'm not sure when don't the Government tax us. As I'm a higher tax payer, I can only save 500 per year tax free in non ISA savings account.

Are there other options where we can save and not pay tax?

Thanks

Not at all, you can save far more that as the tax rules relate to the interest earned, not the amount saved.

And it isn't tax free, it's taxed at 0%.  Might not make any difference to some people but for those that are liable to the High Income Child Benefit Charge, entitled to Married Couple's Allowance or have adjusted net income > £100k it can add to your overall tax liability even though the interest itself is taxed at 0%.

NS&I premium bonds are tax free although your personal return is down to luck.

You describe savings interest as additional income to be added to an individual's gross income for a given tax year. Therefore a marginal basic rate taxpayer earning say £50k/annum along with £800 savings interest, could be reclassified as a higher rate taxpayer?

Dazed_and_C0nfused

Yes, to establish the amount of savings nil rate band (aka PSA) available you have to start by calculating the tax position without the nil rate band.

So assuming no other complications someone with taxable of income of £50,800 would be deemed a higher rate payer and the income above the Personal Allowance would be taxed like this,

£37,430 x 20% (basic rate)
£270 x 0% (savings nil rate within basic rate band)
£230 x 0% (savings nil rate within higher rate band)
£300 x 40% (savings higher rate)

If they were liable to HICBC then this would be charged at 8% (adjusted net income of £50,800).