Protecting our savings

Newbie_John

wmb194 said:

Low coupon gilts are an option. Coupons are taxed as interest as normal but capital gains are exempt from CGT. If you search this forum you'll find some threads on them. 

https://www.yieldgimp.com/

I suggest this thread:
https://forums.moneysavingexpert.com/discussion/6590043/bonds-gilts/p1

it made me understand them.

Albermarle

Screensaver said:

Hi Newbie here.
We seem to be getting squeezed as to where we can protect our savings from the tax man. I am aware of the tax protection an ISA offers, but with the proposed changes to the ISA threshold  looming, Where are you savvy savers putting your savings ? ( Interest above £1000 in banks and building societies attracts interest .
Thanks in advance.

The issue is mainly because interest rates are so much higher than they were, so is actually a good thing.

In fact the UK tax regime for savings interest is very generous by international standards.
Anybody can protect £20K of savings a year in an ISA
Low and non earners, can earn more than £1000 interest outside an ISA.

Newbie_John

Exactly, 4% interests on £25k equals £1000 - so tax free, plus £20k ISA.
So people on 20% tax rate - which is more than half of the country can save £45k tax free.

For example in Poland interests are awarded with 20% tax already deducted by bank - no tax free allowance.  

eskbanker

Newbie_John said:

For example in Poland interests are awarded with 20% tax already deducted by bank - no tax free allowance.  

....which is how it was here too (outside of ISAs), up to 2016.

kempiejon

eskbanker said:

Newbie_John said:

For example in Poland interests are awarded with 20% tax already deducted by bank - no tax free allowance.  

....which is how it was here too (outside of ISAs), up to 2016.

Seemed simpler but less profitable for most. And people are looking to shelter their savings from tax and feel worse off because they now have a tax deduction after allowances. Still a basic rate tax payer who has £50k in premium bonds, is already earning over £1k in interest and can find more than an extra £20k each year to save can't be the majority.

EthicsGradient

Newbie_John said:

Exactly, 4% interests on £25k equals £1000 - so tax free, plus £20k ISA.
So people on 20% tax rate - which is more than half of the country can save £45k tax free.

For example in Poland interests are awarded with 20% tax already deducted by bank - no tax free allowance.  

That's mixing 2 different "limits" - the £25k is the current rough total you can have outside an ISA before you start paying tax; the £20k is the yearly amount you can put into an ISA, where it can accumulate to much more.

The £4k figure, as far as I can tell, has come from one suggestion by someone from Fidelity, who, as a fund/platform manager, would like to see more people use S&S ISAs and pay him charges. This is dressed up, to make it look attractive to the government, as "encouraging investing in UK firms", but only about 20% of managed funds is invested in UK firms. If they didn't think the "British ISA" was worth it, this seems even less justifiable using that idea. 

Newbie_John

Thing is, savings account used to be easy - put £10k at 1% get £10100.
It's just recently became more complicated as people realised that 4-5% interests require them to pay tax.

Investing is actually quite complicated for an average person, unknown returns, the number of choices - etf, fund, gilts, shares.. number of fees - fee for buying, yearly platofrm fee, CGT, dividens limits.. or even things as simple as gilts are complicated in a way that 0.125% gilt can pay more than 5% gilt, then there are also inflation-proof gilts.. 

Bostonerimus1

Screensaver said:

Hi Newbie here.
We seem to be getting squeezed as to where we can protect our savings from the tax man. I am aware of the tax protection an ISA offers, but with the proposed changes to the ISA threshold  looming, Where are you savvy savers putting your savings ? ( Interest above £1000 in banks and building societies attracts interest .
Thanks in advance.

1st post, puts out misinformation....smells like a troll.

Screensaver

Hi Guys
Sorry for late reply. Thanks for all the advice.
My concerns were, I have heard the government could change the allowance for ISA's could drop to 4k instead of the current 20k. 
I was just concerned that if my allowance is used up and I still have a large sum to save. I would only have a regular saving to fall back on, where tax is charged on interest gained over 1k.
Many Thanks

redpete

Screensaver said:

Hi Guys
Sorry for late reply. Thanks for all the advice.
My concerns were, I have heard the government could change the allowance for ISA's could drop to 4k instead of the current 20k. 
I was just concerned that if my allowance is used up and I still have a large sum to save. I would only have a regular saving to fall back on, where tax is charged on interest gained over 1k.
Many Thanks

Unless and until the ISA limit changes then they are still subject to up to £20k per year.  If anyone has a saving (i.e. cash saving) requirement beyond this then you could put some into Premium Bonds - but the typical return is less that a good savings account even after tax, or if you are married you could share the savings out to get up to £40k per year for a couple.
For non-cash savings then there are options of putting the money into pensions, or EIS/SEIS schemes.