Avoiding tax on savings

meester

baldbloke wrote: »

Sorry - I edited my post so that I didn't appear offensive in any way but you have dealt with my original point very fairly. I just had no idea this could happen - I work alongside people on £6 an hour with families who claim Working Tax Credit and we sort of joke how I am just above all that being single - sometimes my eyes are opened by the most unexpected things.

Only if you earn more than £12,920..... Below that you would get WTC.

Obviously the income level is higher for a couple.

Jonbvn

merlinthehappypig wrote: »

Yes they do.

The HRMC website states that you do not need to declare i[FONT=Arial,Arial]ncome from certain tax-exempt investments, such as, Individual Savings Accounts (ISAs), Personal Equity Plans (PEPs) or non-taxable National Savings products so a large percentage of the £100000 could be placed in these, especially if the OP gets this year's ISA open quickly.[/FONT]

That is quite amazing. In theory you could have millions in PEP's, ISA's and NS&I tax-free products and still get tax-credits. That is surely completely lunacy?

Jonbvn

Jonbvn wrote: »

That is quite amazing. In theory you could have millions in PEP's, ISA's and NS&I tax-free products and still get tax-credits. That is surely completely lunacy?

It is even more crazy than I first envisaged. You can also deduct pension contributions from the amount of income used to determine whether tax-credits are due.

baldbloke_2

It seems extraordinary that means tested benefits and Pension credit all use the idea of assuming income from a person's capital - in practice the first few thousand (£6k) is ignored and then £1 pw is taken as income for every £500 above that - and once you get to £16k capital you have no further entitlement. That's roughly how it works and all savings including an isa and ns&i stuff is treated the same.

Yet here we have a benefit system based on tax that applies the same rules as I apply on my tax return. All tax-free products are ignored and the government makes sure you have a guaranteed weekly income by adding to your wage packet.

Most systems would ask you to dip into your accumulated capital before being granted assistance - but not this one apparently!

jaffacat_2

Jonbvn wrote: »

It is even more crazy than I first envisaged. You can also deduct pension contributions from the amount of income used to determine whether tax-credits are due.

Hi, can you clarify this please?Sorry to sound thick but provide our total gross (mine & partners)to tax credits for calculation purposes (this is both our salarys for the year), this includes what I pay as a pension contribution on my monthly salary when I get a pay slip. Should we be deducting the amount I pay for my pension contribution (to work) from our gross salaries (total)? I.e if I pay £100 contibution towards my pension, should we take £1200 off our gross total for both our salaries and provide that total as annual income to tax credits?

What products can you invest in other than ISA's to not incur penalties for tax credits. I dont understand these products so would be grateful of someone explaining how I will no which ones we can invest in without being penalised?
Many thanks in advance

Thanks Lisa

merlinthehappypig

jaffacat wrote: »

Hi, can you clarify this please?Sorry to sound thick but provide our total gross (mine & partners)to tax credits for calculation purposes (this is both our salarys for the year), this includes what I pay as a pension contribution on my monthly salary when I get a pay slip. Should we be deducting the amount I pay for my pension contribution (to work) from our gross salaries (total)? I.e if I pay £100 contibution towards my pension, should we take £1200 off our gross total for both our salaries and provide that total as annual income to tax credits?

What products can you invest in other than ISA's to not incur penalties for tax credits. I dont understand these products so would be grateful of someone explaining how I will no which ones we can invest in without being penalised?
Many thanks in advance

Thanks Lisa

I always quote my P60 figure.

I'm medically retired now so don't have any pension contributions, but seem to recall that these didn't feature on the taxable income figure on the P60 when I was earning anyway. My contributions were taken at source so were never taxed.

Perhaps someone more knowledgable can confirm this or not.

It should be easy enough for you to compare a month 12 payslip with the P60 for the year to see if the figures match. I'd guess that the taxable income figure on the P60 will be less than the total earned, if you are paying into a company pension scheme and it's this figure that should be declared for tax credit purposes.

As for other products it's any tax-free National Savings products such as index-linked savings certificates. There is plenty of information about these on the forums. They will require you to tie your money up for a fixed period so if you need any in a hurry, they won't be suitable.

Jonbvn

jaffacat wrote: »

Hi, can you clarify this please?Sorry to sound thick but provide our total gross (mine & partners)to tax credits for calculation purposes (this is both our salarys for the year), this includes what I pay as a pension contribution on my monthly salary when I get a pay slip. Should we be deducting the amount I pay for my pension contribution (to work) from our gross salaries (total)? I.e if I pay £100 contibution towards my pension, should we take £1200 off our gross total for both our salaries and provide that total as annual income to tax credits?

What products can you invest in other than ISA's to not incur penalties for tax credits. I dont understand these products so would be grateful of someone explaining how I will no which ones we can invest in without being penalised?
Many thanks in advance

Thanks Lisa

For the answer to your first question, please see the link.
http://www.hmrc.gov.uk/leaflets/wtc2.pdf (Look at the section headed income and capital)

For the second part, you can use Index Linked Savings Certs, Premium Bonds, & Fixed Interest Saving Certs.
http://www.nsandi.com/savingneeds/taxfreeinvestments.jsp

nicko33

merlinthehappypig wrote: »

...such as index-linked savings certificates. There is plenty of information about these on the forums. They will require you to tie your money up for a fixed period so if you need any in a hurry, they won't be suitable.

The money is not tied up, but if you withdraw early you do not get the full interest.
No interest at all if withdrawn within 1 year
see http://www.nsandi.com/products/ilsc/rates.jsp
and http://www.nsandi.com/products/ilsc/tandc.jsp

also you can cash in part of the value, you do not have to withdraw everything if you do need early access to it (T&C 43)

jaffacat_2

Thanks for all the advise......this is such a minefield I would hate not to declare something & they catch me up.

Will read the links provided. Given "thanks"for all your useful help

Cheers Lisa

Jonbvn

Good thread this!