Extra 2% on savings ?

intalex

friolento said:

There is more to come on taxation for those on SP only

Exemption altogether perhaps, i.e. align pensioner personal allowance to new state pension?

Dazed_and_C0nfused

intalex said:

friolento said:

There is more to come on taxation for those on SP only

Exemption altogether perhaps, i.e. align pensioner personal allowance to new state pension?

Or have tax deducted at source so no bill (Simple Assessment) is needed in the first place?

Ceejay3000

intalex said:

friolento said:

There is more to come on taxation for those on SP only

Exemption altogether perhaps, i.e. align pensioner personal allowance to new state pension?

More likely reduce payments by a few pennies to cover the tax due. Essentially the same as employees who get taxed at source.

BooJewels

Thanks @friolento - I actually found that later after I posted - although in the budget document I have open, it's numbered 4.167.  It's clearly something they'll need to address.

SnowMan

friolento said:

BooJewels said:

mebu60 said:

BooJewels said:

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.

More racing than sneaking as the SP will soon be above the threshold frozen now until 2031. 

I've done some calcs and using the projected SP figures I've seen for 2027 (i.e. just over the tax allowance) and a guestimate with interest rates and how much of my funds I'll still have, I think I'll pay the smidge of income tax the SP might attract (surely they'll adjust it a little to avoid that particular administrative nightmare) and between ISA allowances until then and the Starting rate and PSA, should actually pay very little.  If interest rates stay high enough that I might need to pay more, then I'll be happy enough with that, as I'll have earned more to live off in the meantime and needed to dip into the capital less.

There is more to come on taxation for those on SP only

That has also been discussed at the end of this thread for anyone who is interested

https://forums.moneysavingexpert.com/discussion/6624677/average-earnings-growth-and-triple-lock/p19

Section62

Ceejay3000 said:

A further reminder that we all have this tax year and next tax year to move taxable savings into ISA wrappers before we get to the point these new rates are applicable. So that's £20k this tax year, £20k the following year, and £12k that can be moved right at the beginning of 2027/28 into ISAs to avoid any impact from these new rates.

For most people this is going to be ample warning to minimise their exposure. In fact ever since interest rates went back up from the historically low levels  a few years back people have been moving their taxable savings back into ISAs.

Also worth a reminder that the flexibility rules mean if the account is a flexible one the money doesn't have to stay inside the ISA for the whole tax year - you can withdraw after 6 April and put the money to some other use, and so long as you return it to the same account by the end of the tax year then you get to keep the larger ISA allowance for future years.

My current cash ISA total balance is only a few pounds at the moment, but I could shelter something in excess of £50k in ISAs if the need arose.

BooJewels

SnowMan said:

friolento said:

BooJewels said:

mebu60 said:

BooJewels said:

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.

More racing than sneaking as the SP will soon be above the threshold frozen now until 2031. 

I've done some calcs and using the projected SP figures I've seen for 2027 (i.e. just over the tax allowance) and a guestimate with interest rates and how much of my funds I'll still have, I think I'll pay the smidge of income tax the SP might attract (surely they'll adjust it a little to avoid that particular administrative nightmare) and between ISA allowances until then and the Starting rate and PSA, should actually pay very little.  If interest rates stay high enough that I might need to pay more, then I'll be happy enough with that, as I'll have earned more to live off in the meantime and needed to dip into the capital less.

There is more to come on taxation for those on SP only

That has also been discussed at the end of this thread for anyone who is interested

https://forums.moneysavingexpert.com/discussion/6624677/average-earnings-growth-and-triple-lock/p19

Reading that reminded me that I will actually get a bit more than the full SP - as I inherit half of my late husband's protected payment, so I think that will add something like a bit over £700 PA to my pension, so that will definitely end up being taxable, if the full SP is hovering around the personal allowance.

saajan_12

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.

Savings are, but interest is not already taxed. Say we're through all allowances, then for an incremental £125 employment income, you are taxed 20% and so receive £100. You put that £100 in a savings account earning 5%, and a year later you have £105. The £5 is taxed at (for now) 20%, meaning you end up with £104, and have paid £26 in tax. 

Thats equivalent to the employer paying you £130 gross, as you'd receive £104 having paid £26 in tax. Ie the same tax as above, but you'd call it being taxed once. 

What you then spend the money on later is separate, and I agree there's double taxation on things like inheritance and vat across the board. But just the tax on interest does not give rise to doubling. 

intalex

I suppose they bought a year's time to work out and implement how savings interest will stagger alongside earned income in determining appropriate tax tiers, e.g. will savings interest be allocated to (0%) personal allowance first or earned income?

eskbanker

intalex said:

I suppose they bought a year's time to work out and implement how savings interest will stagger alongside earned income in determining appropriate tax tiers, e.g. will savings interest be allocated to (0%) personal allowance first or earned income?

The ordering is going to be addressed as part of the changes:

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.