Extra 2% on savings ?

ranciduk

Thanks very much guys 👍😎

BooJewels

Yes, @ranciduk - your situation will remain the same - you're in a similar situation to myself.  The only difference might be if you earned enough interest beyond your allowances so that tax became payable, you'd pay 22p in the pound instead of 20p. 

I will get my state pension in about 18 months, so once that happens, I may start to sneak into taxable territory - depending on how interest rates fare at that time.

happybagger

SnowMan said:

ranciduk said:

I find this all very confusing 

if someone could answer my simple query I would therefore be grateful 😇 

I earn interest on various savings accounts but as I have zero - absolutely nothing - income from other sources I don’t pay any tax on my interest earned currently

so will this remain the same?

(the interest is less than 10k per year)


 Cheers

The interest will still fall within your personal allowance so you will have no tax to pay.

Even if your gross interest was £18,570 you would have no tax to pay, as the first £12,570 of savings interest would come under the personal allowance and 5K of the rest would come under the starter savings band so be taxed at 0% and the remaining £1,000 would be covered by the savings allowance so taxed at 0% also.

ok thanks, so the "starting rate" of 0% is remaining; no changes? 

eskbanker

happybagger said:

ok thanks, so the "starting rate" of 0% is remaining; no changes? 

Yes:

4.229 Starting Rate for Savings – The Starting Rate for Savings will be retained at £5,000 for 2026-27 and will stay at this level until 5 April 2031, allowing individuals with less than £17,570 in employment or pensions income to receive up to £5,000 of savings income tax-free.

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

BooJewels

happybagger said:

SnowMan said:

ranciduk said:

I find this all very confusing 

if someone could answer my simple query I would therefore be grateful 😇 

I earn interest on various savings accounts but as I have zero - absolutely nothing - income from other sources I don’t pay any tax on my interest earned currently

so will this remain the same?

(the interest is less than 10k per year)


 Cheers

The interest will still fall within your personal allowance so you will have no tax to pay.

Even if your gross interest was £18,570 you would have no tax to pay, as the first £12,570 of savings interest would come under the personal allowance and 5K of the rest would come under the starter savings band so be taxed at 0% and the remaining £1,000 would be covered by the savings allowance so taxed at 0% also.

ok thanks, so the "starting rate" of 0% is remaining; no changes? 

I haven't seen anything to suggest that it's changing - it's one I was looking out for - as I felt it might be something that would be reduced or removed.

friolento

jak22 said:

It's not about those who don't pay tax on savings interest, its about those who do. From posts here there's many who do and put effort into maximising the interest which they live off, such as fixes to shield against upcoming interest rate drops. This is a 10% increase on tax paid - on savings on which tax has already been paid once.

We are not paying tax on something that has been taxed before. The tax is on the interest only, not on the capital (including the interest accried in prior tax years).

It's just that the savings for some people will grow a tad slower than they would have done without the increase.

Kim_13

DRS1 said:

OK so does someone want to explain to me why the additional rate on dividends remains unchanged while the additional rate on savings interest goes up by 2%?  Basic rate and higher rate for dividends is going up by 2% so it is nothing special about dividends.

You could argue that in itself is unfair: it’s a 10% increase in the tax you pay on savings interest if you are a basic rate taxpayer with no allowances remaining, but if you are a higher rate taxpayer that same two percentage point rise is only a 5% increase.

fuzzzzy

friolento said:

jak22 said:

It's not about those who don't pay tax on savings interest, its about those who do. From posts here there's many who do and put effort into maximising the interest which they live off, such as fixes to shield against upcoming interest rate drops. This is a 10% increase on tax paid - on savings on which tax has already been paid once.

We are not paying tax on something that has been taxed before. The tax is on the interest only, not on the capital (including the interest accried in prior tax years).

It's just that the savings for some people will grow a tad slower than they would have done without the increase.

Yeah but the capital decreases in real terms every year with inflation, the savings interest often only just retains the value of the capital.

DairyQueen

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.

Well, that's OK then. 

phlebas192

fuzzzzy said:

friolento said:

jak22 said:

It's not about those who don't pay tax on savings interest, its about those who do. From posts here there's many who do and put effort into maximising the interest which they live off, such as fixes to shield against upcoming interest rate drops. This is a 10% increase on tax paid - on savings on which tax has already been paid once.

We are not paying tax on something that has been taxed before. The tax is on the interest only, not on the capital (including the interest accried in prior tax years).

It's just that the savings for some people will grow a tad slower than they would have done without the increase.

Yeah but the capital decreases in real terms every year with inflation, the savings interest often only just retains the value of the capital.

And often not even enough to do that. But, so what? Cash has never been a good store of real value and it's not what it should be used for.