Confused by savings and tax

mark_steps

I put 30k into the santander easy access account that was raved about last year and so far have earned £900 in interest. Its paid monthly, but after watching the show the other night, realised I'm taxed on savings after about £1100 odds interest.
So I opened a chips cash isa last night. 
I'm clueless about money first and foremost so whilst this may appear obvious, bare with me.
I'm thinking I should transfer 20k into the cash isa and then after financial year cut of date in April, add the rest as I won't be taxed on it. 

I never knew you got taxed on savings.

Thanks 

Flugelhorn

mark_steps said:

I never knew you got taxed on savings.

Yes that is the case - seem to remember there were some NET accounts years ago but then they all became paid GROSS and the amount of tax you pay depends on your circumstances. 

Dazed_and_C0nfused

mark_steps said:

I put 30k into the santander easy access account that was raved about last year and so far have earned £900 in interest. Its paid monthly, but after watching the show the other night, realised I'm taxed on savings after about £1100 odds interest.
So I opened a chips cash isa last night. 
I'm clueless about money first and foremost so whilst this may appear obvious, bare with me.
I'm thinking I should transfer 20k into the cash isa and then after financial year cut of date in April, add the rest as I won't be taxed on it. 

I never knew you got taxed on savings.

Thanks 

You don't get taxed on savings.

The interest you earn from savings is taxable income (except when from a cash ISA or inside a pension).

Most people don't pay tax on taxable interest until their total taxable income exceeds £18,570.

If your earnings from a job or pension are £17,570 or more you normally pay tax on the interest after the first £1,000 (this £1,000 is taxed but at a 0% rate).

Most people aren't interested in avoiding paying tax, they want to get the best net return.

So if you are going to be paying tax on any extra interest earned and you would be getting say 5.00% from a taxable account that would really be 4.00% after tax is factored in.

So if you can beat 4.00% in a Cash ISA then it's worth considering but if you would only get say 3.80% in the ISA then paying the tax on the 5.00% account is better(financially).

friolento

The interest rate on your Santander account drops to 4.1% on May 20. So having a backstop like the Chip ISA is probably a good idea, especially as it is a flexible ISA, and you can get your entire £30k plus interest into this ISA before May 20. Mind you, the Chip rate is variable, too. If you are looking for a guaranteed rate, you would need to look elsewhere

Qyburn

mark_steps said:

I'm thinking I should transfer 20k into the cash isa and then after financial year cut of date in April, add the rest as I won't be taxed on it. 

That's exactly what you should do. Although with rates as they are a basic rate tax payer can have around £20k in non-ISA accounts without paying tax on their interest.

MichaelAP

Don’t forget ZOPA do ISA’s as well. The standard non fixed pays 5.08%AER. Fixed ISA rates depend on how many years you lock in.

Albermarle

Tax-free savings: check if you're eligible - Money Saving Expert