paying tax on savings is a bloody con!

[MrsFrugal]

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?

My savings allowance is zero. So I put the maximum into an ISA every year and have the maximum in premium bonds too. They've just announced an increase in the prize fund rate again today - and there is always the tiny possibility of a big win which is fun to speculate about!

I'm sure most people could work out what I mean't poor choice of wording I agree is there any need to be rude? really its pathetic I'm assuming your a grown adult.

I think I need to take a leaf out of your book @edwinbear !

As others have said with £35k I don’t understand why it’s not in ISAs

Watching MSE lastnight and Martin Lewis did say standard ISA's were generally a poor place for your savings, I need to do some more research

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

The BOE is not "putting up" inflation, that's down to supply shocks which is a global thing. The BOE is putting up interest rates to try and protect sterling, if sterling falls, inflation goes up because so much of what we buy is imported or paid for in dollars.

@MrsFrugal There are ways to avoid tax on such a small amount of interest.

But the point is, it is income, same as if a nurse works a couple of extra shifts, he/she will be taxed accordingly, yours is un earned income, so you haven't even given up your time to earn it.

The more people avoid tax, the more everyone else has to pay for roads, nhs schools etc which i take you use or have used?

@LakieLady I know I missed out 'which the BOE is putting up interest rates to curb inflation', typing to quick!

And even the very poorest pay vat, unless they give up buying bog roll, toiletries, cleaning stuff etc.

To be fair, the UK's inflation is staying a lot higher than other countries inflation rates, despite having the same supply shocks.
Germany 8.6% (just seen a 12% drop in energy prices too)
France 6.6%
USA 8.5%

When you can't even get the thing you're angry about right, kinda on shaky ground criticizing others for being pathetic... Anyhow, seems like you've now understood where you were going wrong. Well done for saving so much, good luck with your renovations!

ISAs are going to be popular this year now that interest rates are actually giving people something back on their savings.

Look for a 4% or better rate on a 2 year fix. I got 4.75% last year which seemed a pretty good deal for a cash isa

Absolutely, and I think the BOE should have raised rates more, personally.

But that's easy for me to say, I don't have a mortgage any more, and I'm so old I can remember when some people's mortgages were at 17%.

In a roundabout way, the Op is right. interest rates are currently far less than the rate of inflation ie the purchasing power at the beginning of the year is more than the purchasing power of the sum at the end of the year - including the interest.

This means the interest is a reduction in the real value capital loss, rather than true income.

Obviously, HMRC have defined this interest as income, but oh so generously give an allowance against paying tax on it - which is being reduced. Pre the interest rate crash, interest on savings rates were generally available at ever so slightly above above inflation (HMRC still taxed it all)

This disproportionately affects older people, who may have built up a cushion of savings to mitigate that our state pension system is still (despite triple lock etc) one of the least generous in Europe.

one of the reasons is because too many people had bought their houses based on an historically low interest period and the government can’t afford to crash the housing market.

people with savings are currently being penalised by 1) their money falling in value each year, to help mortgage payers in the black and 2) taxation on what is a return of capital in real value terms.

the money for tax has to come from somewhere and people with some money are an easier target than those without.

I love my S&S ISA, the took out 1k profit last week and used it to pay off a bit of my DC’s mortgage and it’s gone back up by the 1k already. did the same thing last month to pay for Christmas.

What funds are providing such returns @OpportunityKnockss?

You don't even need to put the whole £35k in ISAs. You just need to put in enough to bring your taxable interest income below the £500.

And that's £500 each, so £1k in total between the two of you.

I'm interested to know too. S&S have taken a real hammering recently. There's been a bit of a rebound, but not much.

yes spill the beans @OpportunityKnockss ! mine has been negative for a while although + £41 today for a change 😂

yes I will do that, I just need to sit down and work it all out, I just don't really want to fix into an ISA

YANBU.

The cost to HMRC will be minuscule. You do the return and the computer processes it. Numbers are agreed automatically to the numbers your bank have already reported.

I think the tax free savings allowances are pretty generous honestly.

When I am in charge there will be no tax on costs for commuting. Before WFH it irritated me that I’d have to pay to get to work. Don’t ask me for details on how it will work, I will have people for that!

Yes spill the beans @OpportunityKnockss ! mine has been negative for a while although + £41 today for a change 😂

CT FTSE All-Share Tracker 2 Acc

Legal & General Global Health & Pharmaceuticals Index Trust (I) -

Legal & General US Index Trust (I) -

Jupiter Merian Global Equity Income IRL I GBP Inc

I can’t be bothered to move it

Well stop moaning then. FFS!

What funds are providing such returns @OpportunityKnockss?

I want to know this too.

Your post has made me laugh (in a nice way), I suppose we all want what benefits us personally. i.e commuting for you/savings for me