Extra 2% on savings ?

Pat38493

Is this the first time that the tax on savings interest has not been the same number as the corresponding income tax rate?  If so it could be a PITA for any lazy software designers who assumed they would always be the same number…

gravel_2

Pat38493 said:

Is this the first time that the tax on savings interest has not been the same number as the corresponding income tax rate?  If so it could be a PITA for any lazy software designers who assumed they would always be the same number…

Not for those living in Scotland, this has been a reality for a while. Not that many tax calculators seems to accommodate for that anyway...

adw1977

Pat38493 said:

Is this the first time that the tax on savings interest has not been the same number as the corresponding income tax rate?  If so it could be a PITA for any lazy software designers who assumed they would always be the same number…

Not the first time, but not for a long time.
In the 70s there was 15% extra income tax on unearned income such as savings interest.

Combined with much higher income tax rates generally, this meant some savers could have paid 98% tax on their savings interest!

gatters

Whatever your views of the budget, the additional 2% dividend tax not applying to the additional rate band is inconsistent with the general theme and I was surprised to discover that detail in the document. I'm surprised it hasn't been more discussed. 

jak22

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.

No need for bold text - youve not understood the point. Savings are earnings that have been taxed before. It's already unfair to the tax the interest - it's double tax - now its 10% more double tax.

eskbanker

jak22 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.

No need for bold text - youve not understood the point. Savings are earnings that have been taxed before. It's already unfair to the tax the interest - it's double tax - now its 10% more double tax.

Seems to me that the poster understood your point but disagrees with it, on the basis that it's not 'double tax' at all, for the reasons given, i.e. that income tax is unsurprisingly applied to income, wherever that originates from....

DRS1

gatters said:

Whatever your views of the budget, the additional 2% dividend tax not applying to the additional rate band is inconsistent with the general theme and I was surprised to discover that detail in the document. I'm surprised it hasn't been more discussed. 

Yes It is a mystery.

Why they did that not the lack of discussion - not too many people pay additional rate tax and those that do are probably keeping quiet hoping nobody notices.

intalex

Did I hear her say something about unearned income like savings/dividends/property not attracting NI like earned income being inconsistent and unfair, and so is this 2% basically NI for unearned income?

eskbanker

intalex said:

Did I hear her say something about unearned income like savings/dividends/property not attracting NI like earned income being inconsistent and unfair, and so is this 2% basically NI for unearned income?

Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary… 

…because no National Insurance is charged on property, dividend or savings income.  

It’s not fair that the tax system treats different types of income so differently… 

…and so I will increase the basic and higher rate of tax on property, savings and dividend income by 2ppts… 

…and the additional rate of tax on property and savings income by 2ppts. 

https://www.gov.uk/government/speeches/budget-2025-speech

london21

Increase in tax.