How pay minimum tax on savings.

xylophone

Hi. I’ve been saving a deposit to purchase a house. I have £20000 in an ISA and the rest in an instant access account paying 3.2%

Do you mean LISA?

if not, and you are under 40, had you considered this option?

VXman

Dazed_and_C0nfused said:

VXman said:

Aaftab said:

What are the best options to decease my tax on the savings? 

 Put it into an investment account? Riskier but you can make profits of up to £12300 before capital gains tax kicks in.

I don't think many people investing money today will be able to use the £12,300.

It drops to £6,000 on 6 April 😳

 Ah yes - forgot that,

Money_Grabber13579

Dazed_and_C0nfused said:

VXman said:

Aaftab said:

What are the best options to decease my tax on the savings? 

 Put it into an investment account? Riskier but you can make profits of up to £12300 before capital gains tax kicks in.

I don't think many people investing money today will be able to use the £12,300.

It drops to £6,000 on 6 April 😳

And then halved again to £3,000 for the following year.

Scot_39

Aaftab said:

Hi. I’ve been saving a deposit to purchase a house. I have £20000 in an ISA and the rest in an instant access account paying 3.2% interest. What are the best options to decease my tax on the savings? Or is it better to just pay the tax and earn the interest?

If saving for a home - have you used Lifetime ISA's still around - there are age limitted FTB only iirc - but - they used to carry generous govt bonuses.  My neice used one years ago.  Didn't get full details.  Probably something to look at for next year now.

Basically if a taxpayer - on anything over 17570 a year income from earnings - with normal tax code - and assuming that is the case if buying a house these days - you have no starter rate nil band - so all taxable interest above the £1000 personal savings allowance is taxable at 20% - unless in an ISA or some NS&I accounts / tax free investments. 

If higher rate (pay 40%) - that PSA drops to £500 - and pay 40% on anything above etc.

Assuming basic rate - and purely lookingat taxable savings

Last year at c1% rates - you could have £100,000 savings in taxable interest account and not exceed basic rate £1,000.

At the c3% mark - good but not top instant access account - only need 33.3k to hit the £1000 PSA.

At the 1 yr fix level - say 4% good but not top - 25k balance

Depending on how much you actually have elsewhere - in taxable accounts - and remember you can ignore the ISA 20k - it doesn't count towards taxable interest at all - so the 20k isn't in the above 100k, 33.3k 25k balance examples at all - that would purely be your money elsewhere in taxable accounts.

It's going to catch some people out next year I guess.

Instant access ISA's are current pushing 3.2-3.25% (Cov BS from Tues) - you need 4%+ to match that in taxable account. 

Theres still maybe 3 days to use this years 20K ISA allowance if that isn't used for the 20K already mentioned.  Tight - but if you have access to funds ..... But there may be bank individual deadlines.  And there's always next years allowance from the 6th