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Clarity over tax on savings
Would someone be able to confirm something for me as I think I am misreading this. As a regular rate tax payer it says I can earn £1000 in interest per year before it is taxed. So if I have money in a savings account and I earn £800 in interest and in my ISA £600 interest per annum does that mean I have £1400 interest and have to pay tax on the £400 excess or do they only look at the £800 interest in my savings account and ignore the ISA interest? Thanks for any clarification
Comments
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ISAS are tax free, so you can ignore the interest from ISAs in your calculations in all but some very unusual niche scenarios. So your £800 won’t be taxed. But remember that if you become a higher rate tax payer, your personal savings allowance will fall to £500.
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You only count the non-ISA interest, so you shouldn't pay any tax based on those figures.
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You should lean about product before you invest in it. So, read here https://www.gov.uk/individual-savings-accounts.
You can find answers on all your tax Q on hmrc website.1 -
We have guidance about the personal savings allowance on our website: https://www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income/personal-savings-allowance
It is important to note that the savings allowance does not reduce the amount of taxable income. It is a 0% tax allowance which sits within the basic or higher rate tax band, therefore the savings interest will 'use up' the tax band even if a 0% rate applies to it. This needs to be taken into account when considering the maximum rate of tax paid on income.
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Clarity over tax on savings
Your post title states the above. The clarity is that there is no tax on savings in the UK. There may be tax due on interest from some savings if you are over certain thresholds and don't have your money in an ISA but there is no tax on the savings themselves.
Remember the saying: if it looks too good to be true it almost certainly is.2 -
I get your point but maybe it would have helped had you not said
There may be tax due on some savings…..
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Whoops! Typo now fixed
Remember the saying: if it looks too good to be true it almost certainly is.2
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