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COMPARING TAX FREE SAVINGS AGAINST TAXED SAVINGS
Forgive me fellow Forum users. I am Sunday afternoon brain dead on something that I think should be straightforward.
Please take the scenario as read(I appreciate I may be missing options to make it different). The scenario is that I am trying to compare interest on savings that would be subject to tax against an alternative of savings that would be tax free. Accept if you will that said interest on those savings would be subject to 20% income tax if taxed.
Is there a simple formula/table for determining whether interest subject to tax will provide a better net yield than interest which is tax free? I feel sure there will be a formula or table that will provide easy answers but as I say I feel brain dead right now.
Any easy answer(s) out there?
Please take the scenario as read(I appreciate I may be missing options to make it different). The scenario is that I am trying to compare interest on savings that would be subject to tax against an alternative of savings that would be tax free. Accept if you will that said interest on those savings would be subject to 20% income tax if taxed.
Is there a simple formula/table for determining whether interest subject to tax will provide a better net yield than interest which is tax free? I feel sure there will be a formula or table that will provide easy answers but as I say I feel brain dead right now.
Any easy answer(s) out there?
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Comments
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If the interest would be taxed at 20%, then you can multiply the savings interest rate by 0.8 to get the effective post tax rate.Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.phpFor free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.1
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