Beginner tax question on savings

16 Posts

in Cutting tax
Hi all - can anyone help me with a possible easy question please?
I earn 30k so am a basic rate tax payer and I know this entitles me to earn upto £1000 in interest on savings tax free. I have recently moved in with my partner and sold my house for £200,000. If I put this into a 4% account, this will earn me £8000 per year. So....
1) Will the bank deduct the tax for me?
2) Will my tax code change or....
3) Will I just pay basic rate tax on income 38k (30k income plus 8k interest)?
Thank you
I earn 30k so am a basic rate tax payer and I know this entitles me to earn upto £1000 in interest on savings tax free. I have recently moved in with my partner and sold my house for £200,000. If I put this into a 4% account, this will earn me £8000 per year. So....
1) Will the bank deduct the tax for me?
2) Will my tax code change or....
3) Will I just pay basic rate tax on income 38k (30k income plus 8k interest)?
Thank you
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Replies
All the above assumes the £8k is all reported as taxable in one tax year so not a monthly paid account.
To get 4 % you will need to put the money in a fixed term savings account, which means it will be inaccessible for the period of the fixed term, so presumably you will not be needing the money in the short term?
Cash savings get eroded by inflation. For example at the moment with inflation at 11% and interest at 4%, your money is losing £14k pa in value/purchasing power. Hopefully next year it will erode less but it will still go down.
If you do not need all, or part of the money for some years, you should consider investing some of it, putting it into a pension even.