Taxed on savings interest

Isla1010

I have recently had a tax bill from HMRC and also a new tax code added to my private pension. On further investigation I find that HMRC are billing me for interest on savings from 23/24 and new tax code for 24/25 again for savings.

While I am rightly annoyed, should I bother looking for high interest accounts if the taxman is going to step in?

I have always moved money around to get the best rates but now wondering should I not bother.?

Any advice would be greatly received.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6656294/taxed-on-savings-interest

I think you have got confused somewhere along the line.

You cannot have a new code for 2024/25 now that that tax year has ended.

What are you annoyed about? Having to pay tax on taxable interest? If you didn't want taxable interest you should only use ISA's or zero interest accounts.

Although that isn't very MSE and getting the best net return is generally the best option, at least from a financial perspective!

Isla1010

OK so I got the year wrong. And yes, I am annoyed at having to pay tax on interest. I have asked for advice about high interest accounts and would prefer not to have sarcastic comments. I don't understand an awful lot about tax/savings/pensions etc and try to handle my finances to the best of my ability. Hencde why I thought these forums were to HELP people.

marlot

If you don't want to pay tax, put it in an ISA.

https://www.moneysavingexpert.com/savings/best-cash-isa/

https://www.moneysavingexpert.com/savings/stocks-shares-isas/

Albermarle

The tax regime for savings interest in the U.K. is very generous by International standards.

ISA - personal savings allowance- saver starting rate etc

Much more tax free allowances than you get in most other countries.

Woodstok2000

https://forums.moneysavingexpert.com/discussion/comment/81893076#Comment_81893076

The bottom line is that earning more interest will always benefit you, even if you're taxed on it. If your allowance is £1000 and you earn £1001, you'll still be better off than earning £1000 even though that extra £1 is taxed.

As others have said, avoiding tax is the best policy. Put your money in ISAs, pensions and premium bonds to maximise that benefit

Newly_retired

Even if you have to pay tax on it, interest of £100 giving you £80 is better than £0.

Flugelhorn

https://forums.moneysavingexpert.com/discussion/comment/81893076#Comment_81893076

it is frustrating but yes savings interest is treated as income (with some allowances) and it is taxed at your marginal rate. Mine gets taxed so TBH I don't spend to much effort chasing round looking for a slightly higher rate - also most "high interest" accounts tend to be for relatively low balances

InvesterJones

https://forums.moneysavingexpert.com/discussion/6656294/taxed-on-savings-interest

Yes, you should bother looking for higher interest accounts - even after the taxperson steps in you will be better off, and the country will have to borrow less money, which means less tax in the future.

We also have very generous tax breaks in the UK as others have mentioned, so make sure you're using them as well.

Jordan72

You should also be aware of the Savings Rate band (SRB) - which allows up to a further £5K of tax free savings (on top of the £1K that everyone gets) for those on low incomes - i.e. less than £17,570.00 annually. This can be of benefit to those, like me, where the majority of income is not defined as 'income' because it is dividends from S&S ISAs etc. https://www.gov.uk/apply-tax-free-interest-on-savings

Isla1010

Many thanks to everyone who has responded to my query. Much appreciated!! I will carry on moving my money to higher interest rates as and when necessary.

Once again, thank you 🙏😀