2% tax increase in savings question.

wmb194

https://forums.moneysavingexpert.com/discussion/comment/81990853#Comment_81990853

It makes no difference: the tax rate at the time the interest arises for tax will apply and I've never seen any terms that allow a break on a change in tax rate.

masonic

The provider wouldn't have made any warranty about the amount of tax you'd pay. It is not something they caused or have any control over. Similar to if you got a pay rise or tax thresholds were frozen, pushing you into a higher band.

To break a fix, you'd need to do it for a reason specified in the T&Cs or demonstrate a breach of contract on their part.

When the FSCS protection limit went down, some providers voluntarily let people break fixes to keep their money covered, but the providers claimed a level of protection in their financial promotions which was rendered untrue.

DRS1

The question is not a bad one as you do find tax changes as a reason for early redemption of corporate bonds - but only at the instigation of the issuer not the holder.

Yorkie1

https://forums.moneysavingexpert.com/discussion/comment/81990762#Comment_81990762

I have seen some discussions on here about monthly vs annual interest for products that will span into TY 2027-28. If you tend to select interest paid at the end (where there is a choice), all of that would be received in that later tax year and thus be taxed at 22%. Whereas if you chose monthly interest, some of that would be paid in the TY 2026-27, and so be taxed at 20%. [All assuming the amounts fall outside the person's 0% tax free savings interest amount]

intalex

My fixed rate non-ISAs are all set up to pay out interest monthly, precisely to straight-line the interest income for tax purposes (I offset the loss of compounding benefit by funding regular savers with this interest).

I just wondered whether this forthcoming 2% increase to savings tax rate might require/influence providers to open some flexibility, in which case savers may be able to take advantage of the recently risen yields to uprate their interest…

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81991811#Comment_81991811

I don't think so. As already mentioned, people can end up in different tax bands in different years so already have to deal with this sort of thing - just as getting interest early can be an advantage, so can getting it later in some circumstances. For that reason many offerings are available either monthly or annually, and some allow you to swap between the two at will.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81991811#Comment_81991811

Fixed term accounts have their terms set at the outset of the agreement. If they were to be changed by the provider part way through, this could open up breach of contract complaints which could be costly for the firm. For example, the higher rate taxpayer nearing retirement who will have very little income in a few years and is counting on that interest being taxable at maturity, which it potentially won't be if the provider moves the goalposts and makes the interest accessible.