Savings Interest

[UncleEbenezer]

Heads up here!

I have an interest-bearing savings account that gets topped up each March by an amount calculated with tax in mind (my taxable income for the year), then drawn upon each month to top up the current account.

Last year's interest (credited at the end of December) was rather substantial compared to recent years. This year for the first time I shall have to check all my cash savings and consider whether there's a tax implication to worry about.

I suspect I'm not the only Fool for whom tax on savings interest has just become an issue of potential concern.

[XFool]

Heads up here!

I have an interest-bearing savings account that gets topped up each March by an amount calculated with tax in mind (my taxable income for the year), then drawn upon each month to top up the current account.

Last year's interest (credited at the end of December) was rather substantial compared to recent years. This year for the first time I shall have to check all my cash savings and consider whether there's a tax implication to worry about.

I suspect I'm not the only Fool for whom tax on savings interest has just become an issue of potential concern.

Well yes. Of course, this is all down to 'The Boy George' and his 2013 budget. I remember saying on TMF at the time something like "surely this is going to mean everyone having to do SA?" - OK, an exaggeration at the time but, with interest rates now having increased and tax allowances been frozen, this is slowly coming to pass.

Personally (as a Basic Rate taxpayer) I would give anything to return to the 'old' system - before George Osborne - as I didn't then and wouldn't now have to ever bother with Income Tax SA. My then 'tax accounting' was done every year literally on one sheet of a normal sized Post-It note. It was so simple! (Let us try hard to banish from mind the everlasting confusion in the mind of the many over the "10% dividend tax"! )

Now? No wonder HMRC suspends its phone helpline with increasing frequency.

To be fair, as with all things, there is another side to this. Convenient at a personal level for most ordinary tax payers it was also very 'convenient' for companies and those on high salaries to leave employment and be rehired as 'consultants' working for their own business.

https://en.wikipedia.org/wiki/IR35

[didds]

To be fair, as with all things, there is another side to this. Convenient at a personal level for most ordinary tax payers it was also very 'convenient' for companies and those on high salaries to leave employment and be rehired as 'consultants' working for their own business.

https://en.wikipedia.org/wiki/IR35

Probably derail as IR35 isn't about savings interest of course...

ir35 WAS a terribly implemented concept from the off. Despite Tory claims at the time of its introduction, naturally they never repealed it when they came to power, and have if anything made the IR35 world even murkier. It was never fit for purpose (even if its alleged targets were extracting the urine potentially) and is still so.

[richfool]

Heads up here!

I have an interest-bearing savings account that gets topped up each March by an amount calculated with tax in mind (my taxable income for the year), then drawn upon each month to top up the current account.

Last year's interest (credited at the end of December) was rather substantial compared to recent years. This year for the first time I shall have to check all my cash savings and consider whether there's a tax implication to worry about.

I suspect I'm not the only Fool for whom tax on savings interest has just become an issue of potential concern.

Yes, I've become aware of the increasing amount of savings interest arising as this (tax) year has unfolded and the potential tax implications. Therefore, we have been directing more of our normally short-term savings away from our normal (non-protected) instant access accounts, into our (instant access) cash ISA's.

Though I'm having to watch the implications of a couple of fixed term saving accounts which will mature during next tax year, fortunately they are in joint names, which will reduce the impact on us individually.

I'm hoping there will be some positive changes to the personal tax allowances and savings allowances in the spring budget.

[XFool]

To be fair, as with all things, there is another side to this. Convenient at a personal level for most ordinary tax payers it was also very 'convenient' for companies and those on high salaries to leave employment and be rehired as 'consultants' working for their own business.

https://en.wikipedia.org/wiki/IR35

Probably derail as IR35 isn't about savings interest of course...

Yes of course!

But the OP is about rising interest rates causing more people to be subject to taxation of income.

My post is a reminder of how and why this has come about. Yes, due to increasing interest rates. But only because of the taxation system we now have in place - introduced by George Osborne when chancellor - of not taxing income at source (at the Basic Rate) but after payment and relying on tax free bands on interest and dividends to keep most people out of the HMRC tax system, beyond PAYE for income from employment.

This system, plus frozen tax allowances, plus rising incomes, plus reduced tax free bands on interest and dividend income, along now with those increasing interest rates, is going to result in more people now owing income tax, whether they know it or not. The OP's original point.

In the interest of fairness I pointed out there was another side: tackling misuse of existing tax legislation via finding tax loopholes. This was pointed out at the time of the introduction of the current system which was, presumably, consistent with the ongoing legislation related to IR35.
(There may also have been ideological reasons for the changes in the taxation system)

Whew!

[DrFfybes]

I suspect I'm not the only Fool for whom tax on savings interest has just become an issue of potential concern.

Not the only one, interest and ERI last year put me to within £40 of my personal allowance, and as the builders were delayed I'll end up a taxpayer this year as they won't be done until the next tax year.

After years of suspecting my sister and b-i-l have been 'forgetting' to declare savings income, they mentioned at Xmas they've had a letter from HMRC asking for their savings interest for 2022/3. They got mum's inheritance through in March 2022.

Paul

[didds]

(There may also have been ideological reasons for the changes in the taxation system)

Whew!

indeed. Dawn Primalarolo accusing one man limited company contractors (which a govt website actually advised as a structure until it was removed when IR35 was announced) of being "those rich bastards". When as a MP, financial secretary to the treasury and paymaster general she was almost certainly earning way more than one man limited company contractors. Who was the "rich bastard" then?

didds

[didds]

After years of suspecting my sister and b-i-l have been 'forgetting' to declare savings income, they mentioned at Xmas they've had a letter from HMRC asking for their savings interest for 2022/3. They got mum's inheritance through in March 2022.

Paul

which shows the system doesn't need anyone to fill out SA just because their savings income has become £10 too much in a year presumably.