New rate of tax on interest from April 2027

ColdIron

Don't forget that at the same time income tax allowances will be restructured, changing the order that they are applied with respect to the personal allowance

Presently there is a lot of flexibility regarding the order that income is applied to the PA. From 2027 it will apply to active income (earnings/pensions) first and only then to savings interest (and property income) meaning that they are more likely to be taxed at 22% as they will be treated as a 'top slice' of income

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/81941785#Comment_81941785

I don't follow. Say you have the choice of saving
a) 1yr from 6th April 2026 to 5th April 2027,
or
b) saving 1 yr from 7th April 2026 to 6th April 2027

A falls in the 26/27 tax year at maturity, while B falls in the 27/28 tax year. If you pay tax on interest at maturity, there will not be a net positive, only a loss, with B vs A.

slinger2

https://forums.moneysavingexpert.com/discussion/comment/81941802#Comment_81941802

For (a) you'll pay the tax in January 2028 (say) but in (b) you'll pay the tax in January 2029. So in case (b) you can invest that tax for a year and get 4% interest on it, before you have to pay it.

Or is my logic all flawed? I'm confusing myself now.

mills112

https://forums.moneysavingexpert.com/discussion/comment/81941754#Comment_81941754

me neither to be fair. a lot of my income come from savings so this is a blow. damn.

masonic

The subject of low coupon gilts has been discussed in various other savings threads. These might provide a tax-efficient solution to those caught out.

mills112

https://forums.moneysavingexpert.com/discussion/comment/81941833#Comment_81941833

yeah, i saw that on my hodge bank thread. not invested in gilts before so will have a look.

nottsphil

https://forums.moneysavingexpert.com/discussion/comment/81941825#Comment_81941825

It's flawed.

If you are due 5% interest on a £1000 opening deposit you make today and close in a year's time, then the BR tax liability will be £10. If you delay the account opening until 6 April, then presuming interest at anniversary, tax would be £11. To even just compensate for that extra pound, you would require 10%(net) interest on the £10 during the 12 months over which you have retained it.

cc123mm456

For those interested in gilts, check this MSE article:

https://www.moneysavingexpert.com/savings/uk-gilts-lower-tax-savings/

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81941754#Comment_81941754

I had not missed it, but had forgotten about it. So good that this thread has reminded us !

In fact 25/26 is the last year I will have non ISA interest > £1000, so will not affect me in the end.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81941730#Comment_81941730

I guess what the OP means, is that the tax you may owe on savings interest is not calculated until after the tax year in question has ended.

So not retrospective. Perhaps delayed is a better word ?