I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
On your first point it does depend on what is meant by the wealthier. And whether thats wealthy by way of salary or by asset (or both).
Middle and relatively high PAYE earners have been hammered the past 13 years. Whether that's loss of Child Benefit, the 62% you refer to, lowering or freezing where the 40% started, the 45p band and lowering, pension contribution restrictions etc.
I fortunately fall into that band/category (although I have took a step back in Salary/job the past few years), i'd estimate I pay around £10k more tax than I would have 13 years ago, and that's before inflation which would make it much worse.
The question is where would you take the extra tax from, rightly the personal allowance has increased a lot the past 13 years, I'd still like to see it go further to help the lowest paid, but I struggle to see where from a salary perspective they can take much more.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
Not entirely true, 40% starts at 50k earnings (gross), and whilst if you increase all the bands, where do you take the huge amount of lost taxation from?
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
Not entirely true, 40% starts at 50k earnings (gross), and whilst if you increase all the bands, where do you take the huge amount of lost taxation from?
You're right - heat clearly getting to me today.
You need growth, our tax reciepts are breaking records but we're not seeing the economy performing. I guess we need another "big bang" or huge surge of productivity. I have an outside idea of what it could be but i don't want to collect lolz
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
Taxed on wages when you get paid.
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings Taxed on interest.
It doesn't seem fair that we get taxed so highly on interest when, as others have said, we were taxed on gross income and savings were after tax paid! Think there should be different rates for those that have retired too. Which brings me onto my biggest gripe - state pension. If you have full NI contributions then you get £203.85 per week - or £5.82 an hour based on a 35 hour week. The minimum wage (that the goverment declare is what you need to live on) is £10.42 an hour or £364.70 a week based on 35 hours. So 78% more...why? UK pensioners get the lowest pension in Europe. Not sure why it's so bad!?
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
Taxed on wages when you get paid.
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings Taxed on interest.
If you die Inheritance tax.
One big piss take.
Once again, where would you suggest the a) extra revenue we already need comes from, b) where the additional revenue comes from if we stop taxing certain things (like savings, Inheritance) etc.
It doesn't seem fair that we get taxed so highly on interest when, as others have said, we were taxed on gross income and savings were after tax paid! Think there should be different rates for those that have retired too. Which brings me onto my biggest gripe - state pension. If you have full NI contributions then you get £203.85 per week - or £5.82 an hour based on a 35 hour week. The minimum wage (that the goverment declare is what you need to live on) is £10.42 an hour or £364.70 a week based on 35 hours. So 78% more...why? UK pensioners get the lowest pension in Europe. Not sure why it's so bad!?
Don't forget depending on your tax position you either get £1k, £500 or for us lucky one's £0 allowance on interest before it is taxed. There's also no reason for people to not use their £20k annual ISA allowance, for 99% of the population £20k per annum is less than what they would save per tax year. The problem has been low interest rates, therefore people have not been using their ISA tax allowance, had people done so then, again for 99% of people, tax on savings interest would not come into the picture.
Our state pension is somewhat different from a lot of Europe, for instance Germany is linked to earnings, for the mandatory state pension you have to contribute nearly 19% of your net income between you and your employer. The UK long ago moved to push people into private pension, making it very tax efficient and in more recent times making employer contributions compulsory - so it is difficult to compare us say v Germany as you'd need to take into account peoples private pensions (to a degree).
I just think that when you are taxed on your income that you shouldn't be taxed on your savings as you have already been taxed on it when you earn it.
Go after the big companies and tax avoiders instead
Which is a fair position, but I don’t see how (or why) you would limit that to just cash in bank, people 'save' in many forms. And again i'd reiterate with a £20k ISA allowance any 'average or middle earners' if they take that option would have no need to pay any tax on savings, people who've maxed out those (and their predecessors) will have a seven figure sum, earning tax free.
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
I just think that when you are taxed on your income that you shouldn't be taxed on your savings as you have already been taxed on it when you earn it.
Go after the big companies and tax avoiders instead
Which is a fair position, but I don’t see how (or why) you would limit that to just cash in bank, people 'save' in many forms. And again i'd reiterate with a £20k ISA allowance any 'average or middle earners' if they take that option would have no need to pay any tax on savings, people who've maxed out those (and their predecessors) will have a seven figure sum, earning tax free.
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
Spot on !!
Even if you were only getting 0.5% interest on your savings 5 years ago you could now have £100k saved tax free, and you could now transfer that into a new ISA paying c5%. All tax free interest.
not using your ISA allowance when you can is criminal.
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
AFAIK ISAs aren't locked at all, it's just that if you pull cash out you can't replace it if you've invested the max for that tax year. You might find there's a 12m fixed term cash ISA which would lock up the cash, but generally your investment should be accessible at any time.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Two of the 4 pensions are final salary, 1 is a SIPP (that I started from my own limited company) and in drawdown the other is the state pension. I have a 5th small SIPP that is not in drawdown. I'm saving cos that's what I've always done! Keep thinking I will buy somewhere abroad...have also been considering a rental that I can AirBnB out...but not sure I can be bothered...
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Two of the 4 pensions are final salary, 1 is a SIPP (that I started from my own limited company) and in drawdown the other is the state pension. I have a 5th small SIPP that is not in drawdown. I'm saving cos that's what I've always done! Keep thinking I will buy somewhere abroad...have also been considering a rental that I can AirBnB out...but not sure I can be bothered...
So the SIPP you are drawing on, why? You're taking it out of a tax free wrapper and paying 40% on it then putting the remaining 60% in the bank!! Just don't draw it (or draw less of it).
Not sure why you'd do an Air B&B - you aren't spending the money you already have! You don't need to make more.
Again, I don't know your personal/family situation, but if you are saving it to pass on, pass it on now, or go any enjoy it, if that means a place abroad, or an alternative do an extra 2-3 expensive holidays a year, you've clearly worked for everything you have, now is the time, don't leave it!
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Two of the 4 pensions are final salary, 1 is a SIPP (that I started from my own limited company) and in drawdown the other is the state pension. I have a 5th small SIPP that is not in drawdown. I'm saving cos that's what I've always done! Keep thinking I will buy somewhere abroad...have also been considering a rental that I can AirBnB out...but not sure I can be bothered...
So the SIPP you are drawing on, why? You're taking it out of a tax free wrapper and paying 40% on it then putting the remaining 60% in the bank!! Just don't draw it (or draw less of it).
Not sure why you'd do an Air B&B - you aren't spending the money you already have! You don't need to make more.
Again, I don't know your personal/family situation, but if you are saving it to pass on, pass it on now, or go any enjoy it, if that means a place abroad, or an alternative do an extra 2-3 expensive holidays a year, you've clearly worked for everything you have, now is the time, don't leave it!
Well said. Ever thought about being a financial advisor
Also, as I said previously, there are a few other products/schemes that can give you tax efficient growth/income, rather than just leaving it in a bank account. But as Rob7Lee said above, if you have a flexible pension that you can vary the amount of income you can take then there is no point taking more than you need.
AFAIK ISAs aren't locked at all, it's just that if you pull cash out you can't replace it if you've invested the max for that tax year. You might find there's a 12m fixed term cash ISA which would lock up the cash, but generally your investment should be accessible at any time.
Not strictly true. ISA's now can be "flexible" and you can replace any money you take out. The option to be "flexible" is down to the Company/Financial Institution but the facility was put in place a couple of years ago by The Treasury.
So if I put in the full 20k for the next 10 years let’s say. That’s £200k in an ISA.
If in ten years the interest in that ISA is 5%, would that mean I’m making £10k in interest on it completely tax free? Is there a catch I’m missing?
I have clients that have £500k in their iSA's. All tax free. They can draw money out whenever they like.....tax free. They can take money out monthly, like an income......tax free.
However, that's all in Stocks & Shares iSA's. As cash has not been paying much from 2008 to 2022 most of my clients have been putting their money into investments. Currently Cash ISA's might be the way to go as you could get 5%. But remember, you can transfer your ISA's from Cash into Stocks & Shares and back again at any time. The thing is to make sure you use your ISA Allowance if you can.
So if I put in the full 20k for the next 10 years let’s say. That’s £200k in an ISA.
If in ten years the interest in that ISA is 5%, would that mean I’m making £10k in interest on it completely tax free? Is there a catch I’m missing?
I have clients that have £500k in their iSA's. All tax free. They can draw money out whenever they like.....tax free. They can take money out monthly, like an income......tax free.
However, that's all in Stocks & Shares iSA's. As cash has not been paying much from 2008 to 2022 most of my clients have been putting their money into investments. Currently Cash ISA's might be the way to go as you could get 5%. But remember, you can transfer your ISA's from Cash into Stocks & Shares and back again at any time. The thing is to make sure you use your ISA Allowance if you can.
I need to have a word next time I see you, we have never put a penny into an ISA.
I’m in a position where I could be mortgage free if a pay a big chunk off in the next couple of years. I’d want to be doing something with that money that’s usually put aside for mortgage payments rather than just have it sitting there each month. The ISA route looks like it could be a good one to start building something.
I like the idea of trying to build an income through savings so that when I retire I don’t have to rely on just my pension. Admittedly, I’ve done a poor job of not paying enough into that until recently - so have some catching up to do. I’ve just turned 36, and feel like I really need to turn that part around if it’s going to serve me well in 20-30 years time.
I’m in a position where I could be mortgage free if a pay a big chunk off in the next couple of years. I’d want to be doing something with that money that’s usually put aside for mortgage payments rather than just have it sitting there each month. The ISA route looks like it could be a good one to start building something.
I like the idea of trying to build an income through savings so that when I retire I don’t have to rely on just my pension. Admittedly, I’ve done a poor job of not paying enough into that until recently - so have some catching up to do. I’ve just turned 36, and feel like I really need to turn that part around if it’s going to serve me well in 20-30 years time.
At 36 you've still a long way to go for pension so no real damage done if you are topping it up from your mid 30's.
Agreed on the income from savings, it's about having a mixture and flexibility in my view. A pension is still hard to beat if you are a higher rate tax payer. That 40/60/45% tax relief can be massive. There's potential for IHT benefit as well.
And here's a new one for some;
Using your pension to pay off your mortgage,
If you are a higher rate tax payer, rather than pay a mortgage repayment, go interest only. put the rest into pension and thank the government later for paying off 40% of your mortgage (assuming you can do so from the 25% lump sum, tax free, withdrawal).
I'm not saying taxing savings interest is wrong in general as there are many reasons it should be. However one thing that is ignored is that many people see savings interest as a protection against inflation. For example a pensioner with savings, those savings are effectively eroded by inflation. Interest helps protect it, but with interest rates being below inflation, it is still being eroded; tax on interest amplyfying it.
The other thing nobody has mentioned to avoid tax is looking to increase pension contributions, but advice needed here based on individual circumstances.
I currently have about £120,000 in stocks and shares ISA, I have over a number of years moved funds from non ISA into the ISA account. I will not be adding to this balance from here on. This year I opened a Cash ISA (1 year term).
However, I have been stupidly (I think ?) drawing my dividends from the share ISA as spending. At the same time I have £80,000 Cash savings elsewhere which I’m holding onto and paying tax on the interest.
I should be spending my Cash savings, shouldn’t I ? A then next year open a new Cash ISA for £20,000 and transfer the cash from stocks ISA across to the Cash ISA ?
Comments
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
Middle and relatively high PAYE earners have been hammered the past 13 years. Whether that's loss of Child Benefit, the 62% you refer to, lowering or freezing where the 40% started, the 45p band and lowering, pension contribution restrictions etc.
I fortunately fall into that band/category (although I have took a step back in Salary/job the past few years), i'd estimate I pay around £10k more tax than I would have 13 years ago, and that's before inflation which would make it much worse.
The question is where would you take the extra tax from, rightly the personal allowance has increased a lot the past 13 years, I'd still like to see it go further to help the lowest paid, but I struggle to see where from a salary perspective they can take much more.
You need growth, our tax reciepts are breaking records but we're not seeing the economy performing. I guess we need another "big bang" or huge surge of productivity. I have an outside idea of what it could be but i don't want to collect lolz
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings
Taxed on interest.
If you die
Inheritance tax.
One big piss take.
Don't forget depending on your tax position you either get £1k, £500 or for us lucky one's £0 allowance on interest before it is taxed. There's also no reason for people to not use their £20k annual ISA allowance, for 99% of the population £20k per annum is less than what they would save per tax year. The problem has been low interest rates, therefore people have not been using their ISA tax allowance, had people done so then, again for 99% of people, tax on savings interest would not come into the picture.
Our state pension is somewhat different from a lot of Europe, for instance Germany is linked to earnings, for the mandatory state pension you have to contribute nearly 19% of your net income between you and your employer. The UK long ago moved to push people into private pension, making it very tax efficient and in more recent times making employer contributions compulsory - so it is difficult to compare us say v Germany as you'd need to take into account peoples private pensions (to a degree).
Go after the big companies and tax avoiders instead
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
Even if you were only getting 0.5% interest on your savings 5 years ago you could now have £100k saved tax free, and you could now transfer that into a new ISA paying c5%. All tax free interest.
not using your ISA allowance when you can is criminal.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Not sure why you'd do an Air B&B - you aren't spending the money you already have! You don't need to make more.
Again, I don't know your personal/family situation, but if you are saving it to pass on, pass it on now, or go any enjoy it, if that means a place abroad, or an alternative do an extra 2-3 expensive holidays a year, you've clearly worked for everything you have, now is the time, don't leave it!
Also, as I said previously, there are a few other products/schemes that can give you tax efficient growth/income, rather than just leaving it in a bank account. But as Rob7Lee said above, if you have a flexible pension that you can vary the amount of income you can take then there is no point taking more than you need.
If in ten years the interest in that ISA is 5%, would that mean I’m making £10k in interest on it completely tax free? Is there a catch I’m missing?
However, that's all in Stocks & Shares iSA's. As cash has not been paying much from 2008 to 2022 most of my clients have been putting their money into investments. Currently Cash ISA's might be the way to go as you could get 5%. But remember, you can transfer your ISA's from Cash into Stocks & Shares and back again at any time. The thing is to make sure you use your ISA Allowance if you can.
I’m in a position where I could be mortgage free if a pay a big chunk off in the next couple of years. I’d want to be doing something with that money that’s usually put aside for mortgage payments rather than just have it sitting there each month. The ISA route looks like it could be a good one to start building something.
Agreed on the income from savings, it's about having a mixture and flexibility in my view. A pension is still hard to beat if you are a higher rate tax payer. That 40/60/45% tax relief can be massive. There's potential for IHT benefit as well.
And here's a new one for some;
Using your pension to pay off your mortgage,
If you are a higher rate tax payer, rather than pay a mortgage repayment, go interest only. put the rest into pension and thank the government later for paying off 40% of your mortgage (assuming you can do so from the 25% lump sum, tax free, withdrawal).
The other thing nobody has mentioned to avoid tax is looking to increase pension contributions, but advice needed here based on individual circumstances.
Am I correct here ?