Saving rates as a non taxpayer

FiscalFanny

Hi savers

OK so I have been reading the Forum for a while now and still not sure about something....it seemns logical to me but there's rarely any advice about using your tax free status. I've searched the back threads but can't seem to find much info.

Common advice with savings is to open an ISA as it's tax free. High paying one currently 6.10%. But if I have an instant access account paying 6.41% gross (ICICI HiSave) and I register for gross interest as I will not pay any income tax this year shouldn't I get more in interest from the Instant Access account?

debbie42

This sort of thing is regularly discussed in the forum. ISAs may still have their uses, even if you aren't a tax payer. However, if your income (including interest) won't take you above the tax threshold then you'd get more interest from the one that's paying the higher AER if you register for Gross interest.

CLAPTON

if you pay no tax then yes just get the best rate possible.

however if your tax status is likely to change in the future then you may want to lock in your saving in an tax free ISA

FiscalFanny

Thank Guys, really helpful. As next year I will go into basic rate tax then maybe the short term gain will be minimal on small percentage difference on relatively small sums. Think I'll scrape as much together to get into my ISA before this April (next years ISA will be filled easily as I'll be back working after a child rearing break - hooray)

Steve_xx

Yes, go for the ISA option now. If you went for the ordinary bank account scenario, any interest you derived from your savings would be subject to tax and it would also push your gross income up towards to £5k+ threshold.

Far better to shield it from the taxman in the first place than to rely on not hitting the tax threshold.