Paying tax on savings

Moneyquery345

Hi all

I'm new to this forum, so be gentle!

I've had an inheritance which is lovely but I'm conscious that I will now be paying tax (20%) on the interest from my savings

There isnt much more that I can add to my autoenrolment pension (lowish salary - can only pay in up to my salary each year) and I'm all topped up with Premium Bonds and ISAs. I'm 62.

What would you suggest that I do with the money to avoid paying tax on my savings interest?

TIA 😁

Albermarle

If you are a basic rate taxpayer, earning more than £17570 per year, you can still earn £1000 in interest tax free.
 After that it is difficult, because you already covered the usual other routes.

kuratowski

Have you checked your state pension forecast?  Maybe you have already reached the maximum, but if not then paying voluntary NI contributions has a very good payback.  The state pension is not tax-free, but that shouldn't be the only factor you consider.

If you are married, consider putting more savings in your spouse's name, until all their allowances are also used.

If you don't need the extra interest income now, and could put some of the capital away for a few years, you could consider investing some (this means taking some risk) and make use of the dividend allowance and capital gains exemption.

auser99

Moneyquery345 said:

Hi all

I'm new to this forum, so be gentle!

I've had an inheritance which is lovely but I'm conscious that I will now be paying tax (20%) on the interest from my savings

There isnt much more that I can add to my autoenrolment pension (lowish salary - can only pay in up to my salary each year) and I'm all topped up with Premium Bonds and ISAs. I'm 62.

What would you suggest that I do with the money to avoid paying tax on my savings interest?

TIA 😁

Set up a number of fixed bond accounts that pay on maturity (not annually), for 1,2,3,4 and 5 years, so that they split the interest over different tax years.
While each year continuing to put the full 20k into an ISA.

But at the end of the day, as people on here will tell you, it's much better to get 80% of a wad, rather than 100% of next to nothing.

penners324

Clearing debt, Inc mortgage....

General investment accounts (if you want to put the money aside for awhile)...

Moneyquery345

auser99 said:

Moneyquery345 said:

Hi all

I'm new to this forum, so be gentle!

I've had an inheritance which is lovely but I'm conscious that I will now be paying tax (20%) on the interest from my savings

There isnt much more that I can add to my autoenrolment pension (lowish salary - can only pay in up to my salary each year) and I'm all topped up with Premium Bonds and ISAs. I'm 62.

What would you suggest that I do with the money to avoid paying tax on my savings interest?

TIA 😁

Set up a number of fixed bond accounts that pay on maturity (not annually), for 1,2,3,4 and 5 years, so that they split the interest over different tax years.
While each year continuing to put the full 20k into an ISA.

But at the end of the day, as people on here will tell you, it's much better to get 80% of a wad, rather than 100% of next to nothing.

Thank you @auser99. I've looked around and I cant find savings accounts like that...can you advise please? where might I find them? many thanks

auser99

Moneyquery345 said:

auser99 said:

Moneyquery345 said:

Hi all

I'm new to this forum, so be gentle!

I've had an inheritance which is lovely but I'm conscious that I will now be paying tax (20%) on the interest from my savings

There isnt much more that I can add to my autoenrolment pension (lowish salary - can only pay in up to my salary each year) and I'm all topped up with Premium Bonds and ISAs. I'm 62.

What would you suggest that I do with the money to avoid paying tax on my savings interest?

TIA 😁

Set up a number of fixed bond accounts that pay on maturity (not annually), for 1,2,3,4 and 5 years, so that they split the interest over different tax years.
While each year continuing to put the full 20k into an ISA.

But at the end of the day, as people on here will tell you, it's much better to get 80% of a wad, rather than 100% of next to nothing.

Thank you @auser99. I've looked around and I cant find savings accounts like that...can you advise please? where might I find them? many thanks

On the very site we're on....

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Look for the "at maturity" options in the table for each year.

It "should" be less of a problem now, then say a year ago, but just remember if you lock in for years, and the rates go up, you could frustratingly be sat on a low interest level for ages..

I've just had a 2.67% 1 year expire and be replaced by  a 5.81% for example.

Albermarle

Moneyquery345 said:

auser99 said:

Moneyquery345 said:

Hi all

I'm new to this forum, so be gentle!

I've had an inheritance which is lovely but I'm conscious that I will now be paying tax (20%) on the interest from my savings

There isnt much more that I can add to my autoenrolment pension (lowish salary - can only pay in up to my salary each year) and I'm all topped up with Premium Bonds and ISAs. I'm 62.

What would you suggest that I do with the money to avoid paying tax on my savings interest?

TIA 😁

Set up a number of fixed bond accounts that pay on maturity (not annually), for 1,2,3,4 and 5 years, so that they split the interest over different tax years.
While each year continuing to put the full 20k into an ISA.

But at the end of the day, as people on here will tell you, it's much better to get 80% of a wad, rather than 100% of next to nothing.

Thank you @auser99. I've looked around and I cant find savings accounts like that...can you advise please? where might I find them? many thanks

Most fixed term accounts offer a choice of whether you want the interest paid out annually ( or even monthly), or whether you prefer for the interest to be added into the account and then all of it paid on maturity ( therefore benefitting from compounding).
However even if you opt for taking all the interest on maturity, you may well find that for tax purposes the interest is reported annually to HMRC .
It is a bit of a grey area and there a few threads on the forum about it . Such as this one.
Interest taxed at maturity unfair — MoneySavingExpert Forum