New rate of tax on interest from April 2027

Popgoestheweasle

Hi

Apologies if this has been asked before but I couldn't find an answer.

As tax on savings interest is charged retrospectively (well it is for me anyway!) when the new tax rates come into effect in April 2027 will they be applied only to interest earned from April 2027 onwards or will the new higher apply to any interest earned in the previous tax year(s) which is still under review?

Thank you in advance

Isthisforreal99

Tax on interest is charged retrospectively? That will ne news to the majority I think.

Tax is charged on interest in the year it is paid so if paid or credited after April 2027 then the new rates will apply. Can be slightly more complicated with multi year fixes.

masonic

If you are thinking of saving into a 1 year fix, you'd benefit from doing so this side of the tax year boundary. Likewise for other savings accounts opened after the start of the next tax year, monthly interest may be preferable to annual if annual interest is paid at the 1 year mark.

Ayr_Rage

What new tax rates?

masonic

https://forums.moneysavingexpert.com/discussion/comment/81941665#Comment_81941665

Did you miss this? https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-dividend-income/changes-to-tax-rates-for-property-savings-dividend-income

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81941665#Comment_81941665

From April 2027 tax on interest earned above personal allowances is going up by 2pp.

https://forums.moneysavingexpert.com/discussion/comment/81941654#Comment_81941654

Precisely. One of the nice things about the fixed savings accounts I have covering this period is they can be switched from annual to monthly (and vice versa) at will (well, a couple of clicks), which has been handy for choosing which tax year I want the majority of the interest to fall in.

masonic

I'll be wiping out almost all of my savings in the next few months, so won't be playing the game, but for those accounts you cannot flip to monthly interest, it may be worth refreshing them (closing and reopening) to better align them with the new regime. Assuming they would still be available to you to reopen of course.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6661764/new-rate-of-tax-on-interest-from-april-2027

Tax on interest isn't retrospective, I suspect you have misunderstood how the whole tax on interest system works

boingy

https://forums.moneysavingexpert.com/discussion/comment/81941670#Comment_81941670

Wow. I completely missed that. I knew dividends were changing but not savings.

slinger2

For those paying 20% tax on their savings this effectively reduces taxable savings rates by about 0.1%. Currently a 5.0% return turns into a net 4.0% but this will be 3.9% from April 2027.

slinger2

Also worth noting that it might still be beneficial to have the interest paid in 27/28 rather than 26/27. You'll be paying the tax a year later, potentially getting 4% interest but having to pay 2% extra tax, a net positive.