Extra 2% on savings ?

intalex

eskbanker said:

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. 

Wow, so earned income gets allocated to personal allowance first and savings income stacked at the top which virtually guarantees the 2% uplift...

mebu60

intalex said:

eskbanker said:

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. 

Wow, so earned income gets allocated to personal allowance first and savings income stacked at the top which virtually guarantees the 2% uplift...

Which is the plan (to target 'unearned' income on which NI is not paid).

intalex

mebu60 said:

intalex said:

eskbanker said:

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. 

Wow, so earned income gets allocated to personal allowance first and savings income stacked at the top which virtually guarantees the 2% uplift...

Which is the plan (to target 'unearned' income on which NI is not paid).

Makes sense, but then they should grant NI credits too for those with a certain level of savings interest within the basic rate band... worth a petition, no?

intalex

Not sure if it's already been mentioned, but with the written rule on taxation of interest from fixed rate accounts, any multi-year fixes without the option to pay out interim interest credits, which mature on or after 6 April 2027, should technically be taxed the extra 2% tax on the interest for the entire term...

x44

You should have been around in the 1970's!

Investment income sucharge as it was then called which is exactly the same thing was 15% rather than 2%... oh yes and the top rate of income tax was 83% thereby bringing the marginal rate of tax for a high earner on their unearned income to 98%.

Finally there was no seperate taxation for wives. So a wife's income was simply added ontop of her husbands income and the whole lot taxed at the top marginal rate of the husband to which he got sent hte bill to pay.  So with a high earning husband, 100% of the wife's PAYE type income would be taxed at 83% and if she had any savings income the whole lot of it would have been tax at 98%.

So why did not everyone leave the UK - ah yes well there were capital controls in place you could not simply "take your money" out of the UK. These days in the modern globalised money markets the game of governments instead is exit taxes

topyam

BooJewels said:

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.

How did you become aware of this? 

Kim_13

gesdt50 said:

"

Extra 2% on savings ?"

2% extra on savings is a lot even though it initially seems a small amount until you give a bit of headspace to appreciate the sums, anybody that is saving up for a mortgage has just been sent another nail for the coffin by government ministers that couldn't manage our financial issues during Covid and now wants to fill the coffers up again

10% more tax if you are a basic rate taxpayer (20 to 22%) only 5% more if you are a higher rate payer (40 to 42%) and 4.4% for additional rate. Bigger hike for those on lower incomes. If applied consistently the rates would be 22%, 44% and 49.5%.

BooJewels

topyam said:

BooJewels said:

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.

How did you become aware of this? 

I found out when I rang HMRC about paying missing years of my NI, to try and secure a full SP, after my husband died - at the time I was about 10 or 11 years short - which I've now paid. 

The lady I spoke to was especially kind and helpful and I asked if I might inherit something from his pension and she told me about the protected payment - but it wasn't her department. At the time, she did an internal enquiry on my behalf and said it would be a few weeks before I'd hear anything as they'd have to fully audit his NI payments etc., but I did get a letter about a month or so later confirming that I'd inherit half of his protected payment.  He would have qualified for the equivalent of 4 years extra NI (i.e SP / 35 x 39) - so I'll get half of the extra, which I think works out at SP / 35 x 37 (at current rates, that's £243.41 / week).

See:  https://www.gov.uk/new-state-pension/inheriting-or-increasing-state-pension-from-a-spouse-or-civil-partner

Eco_Miser

gesdt50 said:

"

Extra 2% on savings ?"

2% extra on savings is a lot even though it initially seems a small amount until you give a bit of headspace to appreciate the sums, anybody that is saving up for a mortgage has just been sent another nail for the coffin by government ministers that couldn't manage our financial issues during Covid and now wants to fill the coffers up again

Well, the current government ministers couldn't manage our financial issues during Covid because they were in opposition, so you're conflating two completely different sets of government ministers.

gesdt50

Eco_Miser said:

gesdt50 said:

"

Extra 2% on savings ?"

2% extra on savings is a lot even though it initially seems a small amount until you give a bit of headspace to appreciate the sums, anybody that is saving up for a mortgage has just been sent another nail for the coffin by government ministers that couldn't manage our financial issues during Covid and now wants to fill the coffers up again

Well, the current government ministers couldn't manage our financial issues during Covid because they were in opposition, so you're conflating two completely different sets of government ministers.

Most people listening to the radio  talk shows would bunch all ministers into the same bad management type