New rate of tax on interest from April 2027

nottsphil

https://forums.moneysavingexpert.com/discussion/comment/81941910#Comment_81941910

I don't think this bit of that guide has much merit

However, there is some risk. If the UK was to go bankrupt, then there's a chance the government of the day wouldn't have the cash to pay you back when your gilt matures.

Of course the government will always have enough cash to pay you as it would print the extra money required, whatever the inflationary consequences of that would be.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81941920#Comment_81941920

Or put up taxes even more.

poseidon1

A little surprised there has been so little previous discussion on the impact of the 2% tax uplift on savings/investments interest and rents, which has created three additional tax bands of 22%, 42% and 47% on savings as well as an uplift on dividend taxes across the board.

Scotland's taxpayers have long had to contend with its complex web of 6 tax bands for earnings topping off at 48% in addition to England's 20% savings tax rates and allied dividend taxes. English tax payers are now to be treated to similar 'medicine' in the new tax year albeit the new rates ( for the moment) limited to savings, investments and rental income.

However with certain posters here having admitted the increases flagged in the last budget seemed to have eluded them, I suspect the wider ( less engaged) general public are in for a rude awakening.

One would have expected a degree of proactive marketing by the cash isa companies flagging the future 2% tax increases as an additional impetus to use and retain the ISA tax shelters going forward. Thus far I have seen no real evidence of this.

InvesterJones

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

I follow now :) Yes, if the net interest rate over the following year is higher than the 2pp tax increase, and HMRC aren't proactively collecting it via tax code adjustments, you'd be better off.

I'm too easily led, see edits to other posts for more accuracy!

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81941928#Comment_81941928

However with certain posters here having admitted the increases flagged in the last budget seemed to have eluded them, I suspect the wider ( less engaged) general public are in for a rude awakening.

I would guess that possibly >80% of the public do not have sufficient savings for this to affect them.

Then for the rest the use of ISAs will also mean it is not a problem for most. For the remainder, many will not understand fully how their tax /tax code is calculated and will not notice an extra 2% on interest.

So the number of people who will feel the change, is probably not going to be that large.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81941937#Comment_81941937

Partly agree with your supposition. People who remain basic rate tax payers their entire lifetime will notice little or no change.

However there is an ever increasing cohort moving into the the 40% earnings tax band, and they will certainly feel the pain of the new rates although as you say debateable whether they will fully appreciate or understand the impact if they do not self assess.

That said currently around 18% of the population are in the 40% bracket a sizeable uplift from the appreciably lower 11% figure as recently as 2022/23, and its projected by 2027 that some 7 million people will hit 40% ( ie 20% of the taxpaying population).

fuzzzzy

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

I must admit as someone who just started self assessing a couple of years ago and makes payments on account and also gets taxed on interest through PAYE through my tax code I have been finding it difficult to work out if I am being taxed too much too early. I think the increase in tax on savings interest means I am going to have to try and get my head around how PAYE and self assessment work together a bit better.

nottsphil

https://forums.moneysavingexpert.com/discussion/comment/81941935#Comment_81941935

I've now edited my clumsy post on page two to show that this is not so.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81941946#Comment_81941946

If you know you will be remaining in Self Assessment for the foreseeable future then just ask HMRC to remove the interest from your 2026/27 tax code (too late for 2025/26 now).

You also then need to remember how to complete the question about using information from your tax return i.e. the interest, to keep your tax code upto date.

This is a separate thing to the question about how you want to pay the tax due for the tax year the return relates to.

fuzzzzy

Ok thanks I will give HMRC a ring and tell them to remove the interest from my 26 to 27 tax code.

Sorry I am not clear what your subsequent 2 sentences mean. Are you referring to particular questions on the self assessment form?