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AIBU?

paying tax on savings is a bloody con!

129 replies

MrsFrugal · 25/01/2023 14:15

I have NC for this as I don't like to talk about money. But this has got my back up!

I am very Frugal, we have been saving as we bought a really old house that needs lots and I mean lots of work, I enjoy being savvy with money and move this around for better interest rates etc to maximise it, now I'm not talking millions here we have about 35k, both myself and DH pay the higher tax rate at 40% so the allowance for interest is £500 each before then we have to start paying tax on that! I'm probably just feeling more miffed off about it as hubby got a decent bonus recently and pretty much half of it was swiped straight away. And if we do go over the savings allowance which I will have to keep a close eye on its not going to be by much (£125ish by my calculations at the most), surely the admin fee for HMRC to process this on such a small amount costs more than what they are actually gaining. Anyway I just ranting here, feeling like its all take, take, take at the moments, nice bit of interest rise to try and cancel out a little bit of the bloody mortgage payments and that's then taxed! AIBU?

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Am I being unreasonable?

AIBU

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Wishawisha · 25/01/2023 14:17

You should use all tax free savings first though - so max out your ISA etc. You can also put 50k each into premium bonds for tax free interest (because it comes as “prizes”).

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EuripidesEumenides · 25/01/2023 14:18

Stick it in an ISA then. £35k is less than two people's allowance for one year.

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Aaron95 · 25/01/2023 14:19

Interest on savings is income. Same as if you had shares, property or any other investment. Why should it not be taxed as income?

If you are both in the top tax bracket, your household income is in the top 3% of all housholds in the UK. Do you not think that you should be paying a reasonable level of tax?

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Chickenly · 25/01/2023 14:22

You’re joking right? 😂You’re annoyed about having to pay tax on money that you didn’t even earn because you have too much money in the first place and can’t be bothered to put it places that are tax free.

Lifestyles of the Rich and the Famous, eh?

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Fleabigg · 25/01/2023 14:24

I’d rather more tax on interest and less tax on earned income! It’s not like you work for the former. Use some of the savings to pay down your mortgage more quickly instead if you’re that bothered.

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DesperateIKnow · 25/01/2023 14:26

Hold up. You have £35,000 in savings and can make £1000 in interest between you before you get taxed. So, you’re saving at an interest rate of about 3% before you even get impacted by this? How many pennies is this costing you?

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IMissThe80s · 25/01/2023 14:27

This reply has been deleted

This has been deleted by MNHQ for breaking our Talk Guidelines.

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MrsFrugal · 25/01/2023 14:28

Chickenly · 25/01/2023 14:22

You’re joking right? 😂You’re annoyed about having to pay tax on money that you didn’t even earn because you have too much money in the first place and can’t be bothered to put it places that are tax free.

Lifestyles of the Rich and the Famous, eh?

There's always one!
I can be bothered to move it and I will it just seems a ridiculous waste of HMRC's time and resources to potentially sort out additional tax on something like 125 quid! Hardly rich with 35k, saved for a long time, refuse to borrow and certainly not famous 😂

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Yesthatismychildsigh · 25/01/2023 14:29

You’re not ‘paying tax on savings’. You’re paying tax on interest, which is income.

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Wishawisha · 25/01/2023 14:33

But just move it into an ISA or premium bonds today and then you don’t have to think about this “problem”? It would only be an issue if you had a lot more than 35k.

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MrsFrugal · 25/01/2023 14:33

DesperateIKnow · 25/01/2023 14:26

Hold up. You have £35,000 in savings and can make £1000 in interest between you before you get taxed. So, you’re saving at an interest rate of about 3% before you even get impacted by this? How many pennies is this costing you?

I have a few different accounts, one at 5% only a small amount though and the other I'm just going to move to 3% so yes it takes us over that amount - only slightly. Its depreciating anyway due to inflation which the BOE is putting up to curb spending thus encourage saving - so it seems a bit backwards to me

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TimeForMeToF1y · 25/01/2023 14:36

MrsFrugal · 25/01/2023 14:28

There's always one!
I can be bothered to move it and I will it just seems a ridiculous waste of HMRC's time and resources to potentially sort out additional tax on something like 125 quid! Hardly rich with 35k, saved for a long time, refuse to borrow and certainly not famous 😂

I'm going to moan about having so much money my interest is taxed but I can't be bothered to spend 5 minutes online to open an ISA


How stupid are you then ?

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Chickenly · 25/01/2023 14:36

MrsFrugal · 25/01/2023 14:28

There's always one!
I can be bothered to move it and I will it just seems a ridiculous waste of HMRC's time and resources to potentially sort out additional tax on something like 125 quid! Hardly rich with 35k, saved for a long time, refuse to borrow and certainly not famous 😂

Your OP says you move it lots…

And you’ve said “there’s always one” as if most people haven’t expressed the exact same sentiment.

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MirandaWest · 25/01/2023 14:36

It’s only been since 2016 that there’s been a personal savings allowance ie the £1,000/£500 tax free interest. So it’s only relatively recently since you’d have been paying 40% on all your savings income.

it’s just one of those things - it’s up to you whether you move some money around to save the tax or not.

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DesperateIKnow · 25/01/2023 14:38

MrsFrugal · 25/01/2023 14:33

I have a few different accounts, one at 5% only a small amount though and the other I'm just going to move to 3% so yes it takes us over that amount - only slightly. Its depreciating anyway due to inflation which the BOE is putting up to curb spending thus encourage saving - so it seems a bit backwards to me

It’s not “backwards” at all, it makes perfect sense. You don’t get to complain about the tax system because you’re not smart enough to be tax efficient. You’ve chosen not to set up in a way that means you’d be tax exempt, that was your choice. Why are you moaning now? Either set up your savings to be tax free or pay your tax.

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MrsFrugal · 25/01/2023 14:39

Chickenly · 25/01/2023 14:36

Your OP says you move it lots…

And you’ve said “there’s always one” as if most people haven’t expressed the exact same sentiment.

@Chickenly jealously is not a nice trait.

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MrsFrugal · 25/01/2023 14:40

DesperateIKnow · 25/01/2023 14:38

It’s not “backwards” at all, it makes perfect sense. You don’t get to complain about the tax system because you’re not smart enough to be tax efficient. You’ve chosen not to set up in a way that means you’d be tax exempt, that was your choice. Why are you moaning now? Either set up your savings to be tax free or pay your tax.

its a free country and yes I do get to complain just like I am right now!

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Chickenly · 25/01/2023 14:40

MrsFrugal · 25/01/2023 14:39

@Chickenly jealously is not a nice trait.

If you look at my posting history, you’ll see I earn far more than you and have more in assets. It’s not jealousy. I just think (like most people) that those who have excess should pay more tax and, frankly, that if you want to avoid paying tax then you should do the two minutes of admin instead of just whinging.

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DesperateIKnow · 25/01/2023 14:42

MrsFrugal · 25/01/2023 14:40

its a free country and yes I do get to complain just like I am right now!

And people get to criticise you, like they are. Funny how you have a problem with other people expressing their opinions but not with expressing your own.

Regardless, having savings interest set below inflation to increase movement in the economy is economic fact, it’s not an opinion.

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HandbagsnGladrags · 25/01/2023 14:43

You know that's the entire point of an ISA, right?

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purplejungle · 25/01/2023 14:43

Offset mortgage is one way around this

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peaceandpotato · 25/01/2023 14:43

Are you using your isa allowances? This is what they are for

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MrsFrugal · 25/01/2023 14:43

MirandaWest · 25/01/2023 14:36

It’s only been since 2016 that there’s been a personal savings allowance ie the £1,000/£500 tax free interest. So it’s only relatively recently since you’d have been paying 40% on all your savings income.

it’s just one of those things - it’s up to you whether you move some money around to save the tax or not.

Yes I will have to move some of it elsewhere, its never been a problem as the interest rates have been so low and we haven't had this much in savings before.

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peaceandpotato · 25/01/2023 14:43

HandbagsnGladrags · 25/01/2023 14:43

You know that's the entire point of an ISA, right?

Cross posted

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FinallyHere · 25/01/2023 14:44

Yesthatismychildsigh · 25/01/2023 14:29

You’re not ‘paying tax on savings’. You’re paying tax on interest, which is income.

This.

Hope the difference is now clearer.

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