Taxed on Savings - newbie

Bucki

hey all

apologies if this is a frequent question.
recently noticed my monthly wage was not same and noticed the tax code had changed… unsure why, so called HMRC.

they said it is due to tax on hour savings.
Firstly! I was shocked how they knew about my savings (50K) on another online saving account that i never declared… turned out that they got information from my main bank account which is the nominated account.

they said around £2k tax and i wonder how that is calculated? Is it taxed on other overall amount of saving or rather the interest that I got from the saving account?? Also, they said the figure is for 23-24 (a year behind) tax year.

god damn! Basically I wanted to make money from savings and now its counterbalanced and equally taking away whatever i tried to save up …. What is the point?

what’s the option here?
if I gift it it, will that be still taxable? 

Any advise on this?
anybody had experienced same and what have you done to overcome it?

thanks

Dazed_and_C0nfused

Bucki said:

hey all

apologies if this is a frequent question.
recently noticed my monthly wage was not same and noticed the tax code had changed… unsure why, so called HMRC.

they said it is due to tax on hour savings.
Firstly! I was shocked how they knew about my savings (50K) on another online saving account that i never declared… turned out that they got information from my main bank account which is the nominated account.

they said around £2k tax and i wonder how that is calculated? Is it taxed on other overall amount of saving or rather the interest that I got from the saving account?? Also, they said the figure is for 23-24 (a year behind) tax year.

god damn! Basically I wanted to make money from savings and now its counterbalanced and equally taking away whatever i tried to save up …. What is the point?

what’s the option here?
if I gift it it, will that be still taxable? 

Any advise on this?
anybody had experienced same and what have you done to overcome it?

thanks

You don't pay tax on savings.  You pay tax on (taxable) interest.  

At the moment HMRC will normally be using the actual figures from 2023-24 as an estimate for 2024-25 and 2025-26.

Once the actual figures for 2024-25 are supplied by the banks then HMRC will review the final position for that tax year and also usually update your 2025-26 tax code to use the 2024-25 info as a more up to date estimate.

If you give your capital away then that's your choice.  But seems an extreme option.  Surely 60/80% of the interest earned is better than earning zero interest 😳.

Interest you have already earned will always be your income. 

If you prefer to have the capital and not pay tax then Cash ISA's are your friend.  In theory you could add £20k today and another £20k tomorrow.  But time is very pressing now to open or fund an ISA for 2024-25.

DRS1

Have you considered an ISA?

Shame you have missed the end of the 2024/5 tax year but you can set one up on Monday and use the 2025/6 £20k allowance.

By the way you are unlikely to lose that much of the interest to income tax

Bucki

Hi thanks for the update and advise.
the current online saving is offering 4.60%

I have not seen an ISA offering that close.
are you guys the £2k they taxed me is just estimate until they get a better idea?

trying to u derstand how i could have been taxed 2K on the interested that I got round 2500 - 3000 per year. How is that possible? I dont get it

Ultimately, we are trying to make money out of our own money we have saved all years and then feels like knock on my head … whats point earning 2500-3000 a year and then taxed 2000 in end.

what a disaster

Dazed_and_C0nfused

Bucki said:

Hi thanks for the update and advise.
the current online saving is offering 4.60%

I have not seen an ISA offering that close.
are you guys the £2k they taxed me is just estimate until they get a better idea?

trying to u derstand how i could have been taxed 2K on the interested that I got round 2500 - 3000 per year. How is that possible? I dont get it

Ultimately, we are trying to make money out of our own money we have saved all years and then feels like knock on my head … whats point earning 2500-3000 a year and then taxed 2000 in end.

what a disaster

I suspect your maths is letting you down here or you haven't understood your new tax code.

If you are being taxed on £2k then, for most people, that will be either £400 or £800 in extra tax (20% or 40%).  And you would have another £500 or £1,000 being taxed at 0%, so the overall tax rate is less than 20/40%.

wmb194

Bucki said:

hey all

apologies if this is a frequent question.
recently noticed my monthly wage was not same and noticed the tax code had changed… unsure why, so called HMRC.

they said it is due to tax on hour savings.
Firstly! I was shocked how they knew about my savings (50K) on another online saving account that i never declared… turned out that they got information from my main bank account which is the nominated account.

they said around £2k tax and i wonder how that is calculated? Is it taxed on other overall amount of saving or rather the interest that I got from the saving account?? Also, they said the figure is for 23-24 (a year behind) tax year.

god damn! Basically I wanted to make money from savings and now its counterbalanced and equally taking away whatever i tried to save up …. What is the point?

what’s the option here?
if I gift it it, will that be still taxable? 

Any advise on this?
anybody had experienced same and what have you done to overcome it?

thanks

You were trying to evade tax?; You're sure it wasn't £2k in interest? That would be 4% on £50k. If you're a basic rate taxpayer you'd then have a £1,000 0% allowance (£500 higher rate) and then you'd be taxed 20% on the rest, so £200.

https://www.gov.uk/apply-tax-free-interest-on-savings

exel1966

It's Jackanory Time !

DRS1

the current online saving is offering 4.60%

I have not seen an ISA offering that close.

Have a look at page 1 of this thread,
Cash ISAs: The Best Currently Available List — MoneySavingExpert Forum

Bucki

Dazed_and_C0nfused said:

Bucki said:

Hi thanks for the update and advise.
the current online saving is offering 4.60%

I have not seen an ISA offering that close.
are you guys the £2k they taxed me is just estimate until they get a better idea?

trying to u derstand how i could have been taxed 2K on the interested that I got round 2500 - 3000 per year. How is that possible? I dont get it

Ultimately, we are trying to make money out of our own money we have saved all years and then feels like knock on my head … whats point earning 2500-3000 a year and then taxed 2000 in end.

what a disaster

I suspect your maths is letting you down here or you haven't understood your new tax code.

If you are being taxed on £2k then, for most people, that will be either £400 or £800 in extra tax (20% or 40%).  And you would have another £500 or £1,000 being taxed at 0%, so the overall tax rate is less than 20/40%.

Indeed, my math is zero nor understand much on taxes anyway. When I logged onto the Gateway account i had 12K+ personal allowance of which over £3k was deducted = one of them was around 2k taxed on savings.

yet, no clue how it has come to that sum.
in my logic saving 50% at 4.60% is round 200 a month (was at 4.80 initially and dropped) that is round 2500-3000 a year and now paying £2000 tax is beyond my understanding …. Pls help me understand, i am a noob when it comes to math.

Bucki

wmb194 said:

Bucki said:

hey all

apologies if this is a frequent question.
recently noticed my monthly wage was not same and noticed the tax code had changed… unsure why, so called HMRC.

they said it is due to tax on hour savings.
Firstly! I was shocked how they knew about my savings (50K) on another online saving account that i never declared… turned out that they got information from my main bank account which is the nominated account.

they said around £2k tax and i wonder how that is calculated? Is it taxed on other overall amount of saving or rather the interest that I got from the saving account?? Also, they said the figure is for 23-24 (a year behind) tax year.

god damn! Basically I wanted to make money from savings and now its counterbalanced and equally taking away whatever i tried to save up …. What is the point?

what’s the option here?
if I gift it it, will that be still taxable? 

Any advise on this?
anybody had experienced same and what have you done to overcome it?

thanks

You were trying to evade tax?; You're sure it wasn't £2k in interest? That would be 4% on £50k. If you're a basic rate taxpayer you'd then have a £1,000 0% allowance (£500 higher rate) and then you'd be taxed 20% on the rest, so £200.

https://www.gov.uk/apply-tax-free-interest-on-savings

Well … its not like i got that money out of nowhere! I worked like a donkey all my life in labour work. And then getting £2k on top is beyond me …

i am basic tax payer at 20%

Then was trying to make some money out of my saving instead of let sat there rotting! So in a sence, I got 250£ per month from interest and then 8 need to pay 20% on top of that back ??

 

Bucki

exel1966 said:

It's Jackanory Time !

My bad not sure what that means