Extra 2% on savings ?

Isthisforreal99

ColdIron said:

Scotland's 'basic' rate(s) of tax (19%, 20% and 21%) will now be less than England's. Who would have thunk that the SNP was the party of low tax for 'working people'? 

1. You do realise the SNP budget is yet to come
2. The increase in savings rate has nothing to do with the normal income tax rates.

jak22

As there are often posts about tax on interest it's fair to assume not everyone has all their savings in ISAs or interest covered by the allowances.

So although headlines and threads concentrate on the annoying change to ISA limits, this is a just as important change - 20% to 22% is a 10% rise, and on dividends an even worse 23% rise after it was increased not long ago and seems strange if the ISA change is to encourage investing.

FIREDreamer

jak22 said:

As there are often posts about tax on interest it's fair to assume not everyone has all their savings in ISAs or interest covered by the allowances.

So although headlines and threads concentrate on the annoying change to ISA limits, this is a just as important change - 20% to 22% is a 10% rise, and on dividends an even worse 23% rise after it was increased not long ago and seems strange if the ISA change is to encourage investing.

No dividend tax in an ISA though.

SnowMan

Changes to tax rates for property, savings & dividend income

https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-dividend-income

subjecttocontract

It's not going to make much difference. Someone receiving £10,000 in taxable savings interest will only be paying another £200. Nothing to loose sleep about.

Grandst2

This is a 2% investment income surcharge. In the 70s it was 15% so this will be pushed up year after year.

SiliconChip

subjecttocontract said:

It's not going to make much difference. Someone receiving £10,000 in taxable savings interest will only be paying another £200. Nothing to loose sleep about.

Agreed, I think the important thing was that there's no change to savings interest allowances so if you weren't paying tax already you won't be with the new rates. I'll pay a little more tax (reducing all the time with falling interest rates and more of my savings going into ISAs) but not enough to make me cry about it.

subjecttocontract

But surely, year on year, savvy savers will be putting more of their savings away in tax free ISAs so that less of it will be subjected to any future surcharge ?

jak22

Nonsense. The savings 'allowances' work with the normal income tax thresholds which are frozen and so with earnings and pension income more people will likely be paying more tax on savings income. It might not worry some but this is a savings and investment board where most threads are about maximising income.

SnowMan

A necessary change given the higher rate of tax on savings vs employed income for example but could hit a few people

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

4.117 Ordering of income tax reliefs and allowances – The government is changing income tax rules so that reliefs and allowances deductible at steps 2 and 3 of the income tax calculation will only be applied to property, savings and dividend income after they have been applied to other sources of income. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027