Savers in the UK are being alerted to potential tax issues on their interest earnings, especially those with higher savings.
London: Savers are getting a heads-up about possible tax liabilities on the interest from their savings accounts. Alice Haine, a personal finance expert at Bestinvest, is sounding the alarm.
She points out that when your savings start getting taxed depends on the interest rate and how often it’s applied. So, if you’ve got a good savings rate, you might hit that tax threshold sooner than you think. A lot of folks don’t even realize they could owe tax on their interest.
For example, higher-rate taxpayers can have around £11,600 in a savings account at a 4.31% interest rate before they hit their £500 personal savings allowance. Basic-rate taxpayers have a bit more leeway, with just under £23,200 before they breach their £1,000 allowance.
Alice also shared some smart saving tips. She mentioned that the £20,000 limit applies to all types of ISAs. So, if you’re savvy, you could stash some cash in a high-interest Cash ISA and the rest in a Stocks and Shares ISA for better long-term returns.
She also suggested that those earning just over the £50,270 threshold could use salary sacrifice to lower their taxable income. This way, they’d not only pay less tax but also boost their pension savings and double their personal savings allowance.
But she warned that while salary sacrifice can help with your future, it might affect your credit access, like mortgages, since your income would look lower. Plus, benefits like life cover and maternity pay could be impacted, so it’s wise to chat with your employer about how this could change your take-home pay and benefits.
