Flexible Isa to reduce tax on savings which may, with interest rates 'soaring', become taxable.

Tyrnog

Freebird53 said:

Good morning,

Things appear to be getting slightly more complex.

I have some savings, which as stated, with interest rates rising, may soon make these savings liable to be taxed.

I have also become aware of 'Flexible' ISA's. And after reading an article on the main site,

I am wondering:-

Could I set up a Flexible ISA now (or at any time before April 2024), leave my savings where they already are, in an account attracting a higher rate of interest, and then transfer a portion of those savings into the Flexible ISA before 5th April 2024 to make those savings tax exempt?

Thanks.

In addition to what others have said, also suggest you factor into your thinking that ISA allowances are not 'stackable' from year to year - I personally made the mistake when they first came out of thinking it wasn't worth the hassle; I now regret missing out on those previous annual allowances.

LHW99

Freebird53 said:

eskbanker said:

Freebird53 said:

Re: Increasing or scrapping personal savings allowance:-

https://www.thisismoney.co.uk/money/saving/article-12282665/When-savers-need-file-tax-return.html

"It really is in the Government's interest to lift the personal savings allowance in line with rising interest rates, it would have saved it a whole lot of grief. "

Maybe it's not just wishful thinking?

Seems very much wishful thinking to me when a tax adviser opines that their life would be easier if there was a higher threshold, so that comment ought to be taken with a substantial pinch of salt rather than being seen as representative of government policy!

Point taken, but as referred to in the article, surely HMRC will not be relishing the extra workload either....

Used to be that the banks automatically deducted basic rate tax from interest, and you had to fill in a form if you were a non-taxpayer.

eskbanker

Freebird53 said:

eskbanker said:

Freebird53 said:

Re: Increasing or scrapping personal savings allowance:-

https://www.thisismoney.co.uk/money/saving/article-12282665/When-savers-need-file-tax-return.html

"It really is in the Government's interest to lift the personal savings allowance in line with rising interest rates, it would have saved it a whole lot of grief. "

Maybe it's not just wishful thinking?

Seems very much wishful thinking to me when a tax adviser opines that their life would be easier if there was a higher threshold, so that comment ought to be taken with a substantial pinch of salt rather than being seen as representative of government policy!

Point taken, but as referred to in the article, surely HMRC will not be relishing the extra workload either....

Maybe, but I imagine that the government would be quite happy to fund increased staffing at HMRC rather than missing out on the (presumably much larger) incremental tax revenue, although the cynic might suggest that they'll try for the higher tax take without improving HMRC resourcing....

Dazed_and_C0nfused

eskbanker said:

Freebird53 said:

eskbanker said:

Freebird53 said:

Re: Increasing or scrapping personal savings allowance:-

https://www.thisismoney.co.uk/money/saving/article-12282665/When-savers-need-file-tax-return.html

"It really is in the Government's interest to lift the personal savings allowance in line with rising interest rates, it would have saved it a whole lot of grief. "

Maybe it's not just wishful thinking?

Seems very much wishful thinking to me when a tax adviser opines that their life would be easier if there was a higher threshold, so that comment ought to be taken with a substantial pinch of salt rather than being seen as representative of government policy!

Point taken, but as referred to in the article, surely HMRC will not be relishing the extra workload either....

Maybe, but I imagine that the government would be quite happy to fund increased staffing at HMRC rather than missing out on the (presumably much larger) incremental tax revenue, although the realist might suggest that they'll try for the higher tax take without improving HMRC resourcing....

Corrected that for you 😄.

The process to establish the tax due already exists.  The problem will be if a lot people don't understand why they owe additional tax and swamp HMRC with additional calls/letters/webchats.

As so many people, including it seems some HMRC front line staff, don't understand how tax on interest works there would be a lot of very confused people out there!!

eskbanker

Dazed_and_C0nfused said:

The process to establish the tax due already exists.  The problem will be if a lot people don't understand why they owe additional tax and swamp HMRC with additional calls/letters/webchats.

As so many people, including it seems some HMRC front line staff, don't understand how tax on interest works there would be a lot of very confused people out there!!

I'm sure you're right about increased inbound contact but presumably significant additional numbers of people needing PAYE coding adjustments and/or tax collection via other means will generate extra HMRC workload, even though the process itself is well defined....

Dazed_and_C0nfused

eskbanker said:

Dazed_and_C0nfused said:

The process to establish the tax due already exists.  The problem will be if a lot people don't understand why they owe additional tax and swamp HMRC with additional calls/letters/webchats.

As so many people, including it seems some HMRC front line staff, don't understand how tax on interest works there would be a lot of very confused people out there!!

I'm sure you're right about increased inbound contact but presumably significant additional numbers of people needing PAYE coding adjustments and/or tax collection via other means will generate extra HMRC workload, even though the process itself is well defined....

Given there are over 30 million taxpayers, only a relatively small proportion of which will not have a tax code I can't imagine it isn't chiefly an automated process 

For example I very much doubt staff members are responsible for issuing all the tax codes needed as part of HMRC's annual coding exercise!

Some interesting stats here.

https://www.gov.uk/government/statistics/income-tax-liabilities-statistics-tax-year-2018-to-2019-to-tax-year-2021-to-2022/summary-statistics

eskbanker

Dazed_and_C0nfused said:

eskbanker said:

Dazed_and_C0nfused said:

The process to establish the tax due already exists.  The problem will be if a lot people don't understand why they owe additional tax and swamp HMRC with additional calls/letters/webchats.

As so many people, including it seems some HMRC front line staff, don't understand how tax on interest works there would be a lot of very confused people out there!!

I'm sure you're right about increased inbound contact but presumably significant additional numbers of people needing PAYE coding adjustments and/or tax collection via other means will generate extra HMRC workload, even though the process itself is well defined....

Given there are over 30 million taxpayers, only a relatively small proportion of which will not have a tax code I can't imagine it isn't chiefly an automated process 

For example I very much doubt staff members are responsible for issuing all the tax codes needed as part of HMRC's annual coding exercise!

Some interesting stats here.

https://www.gov.uk/government/statistics/income-tax-liabilities-statistics-tax-year-2018-to-2019-to-tax-year-2021-to-2022/summary-statistics

Again I'm sure you're right that there'll be substantial automation, but would still have thought that workload would be affected to some degree by volumes paying tax on interest. Do you know of any published stats about HMRC staff role breakdown and what they do?

badger09

Dazed_and_C0nfused said:

eskbanker said:

Dazed_and_C0nfused said:

The process to establish the tax due already exists.  The problem will be if a lot people don't understand why they owe additional tax and swamp HMRC with additional calls/letters/webchats.

As so many people, including it seems some HMRC front line staff, don't understand how tax on interest works there would be a lot of very confused people out there!!

I'm sure you're right about increased inbound contact but presumably significant additional numbers of people needing PAYE coding adjustments and/or tax collection via other means will generate extra HMRC workload, even though the process itself is well defined....

Given there are over 30 million taxpayers, only a relatively small proportion of which will not have a tax code I can't imagine it isn't chiefly an automated process 

For example I very much doubt staff members are responsible for issuing all the tax codes needed as part of HMRC's annual coding exercise!

Some interesting stats here.

https://www.gov.uk/government/statistics/income-tax-liabilities-statistics-tax-year-2018-to-2019-to-tax-year-2021-to-2022/summary-statistics

Those were the days. 

Especially when there was more than one ‘in year change’

Freebird53

Looks like my wishful thinking is catching!

https://www.thisismoney.co.uk/money/saving/article-12311275/Come-Jeremy-savers-tax-break-call-Chancellor-double-tax-free-allowance-1-000-2-000.html