Tax on savings??

[Bubblegum25]

I won't pretend to be an expert on the subject, and having read different articles/information online, I feel even more confused than I did before.

Can someone please explain to me how this will work if Labour are voted in?

My lovely dad gifted me 60k towards a house deposit around 8 months ago which I still have as the market is terrible where I am at the moment. The money is in a current account, not a savings account so not making any interest etc. I work full time on a low wage and currently rent alone so no chance of me ever buying a house without this money even though I do try and save myself (before people say I'm selfish or greedy). Will I be taxed on this?

Sorry if I sound stupid but I honestly haven't got a clue and it's all a bit confusing and worrying!

Unless you're a higher rate taxpayer you're only taxed on interest from savings above £1000 a year. I don't know if Labour will change things.

You do have to think about inheritance tax as if your Dad dies within 7 years of gifting you the money you will have to pay tax at a tapered rate. Inheritance tax starts at 40%.

You can put some of that money into tax-free savings (ISAs) but as poster said above, you will only be taxed on interest. Which will be very little in a current account.

The more pressing issue is if you aren’t in a position to buy a property soon then put the money into an ISA at the bare minimum immediately. Between inflation and housing price increases your 60k is worth less every single day.

You are allowed to earn a certain amount before you are taxed. You can get lots of helpful information about this on moneysavingexpert.com website in the 'savings' section.
You really need to get this money into an account with a decent interest rate, you are losing out, especially if you wont be using it for a while. Better in your pocket than the bank's.

You should be paying tax on savings now.

Missed the bit where you said it's in a current account. Why? You can set-up an instant access savings account in a matter of hours online.

I'm not sure but could you buy some premium bonds. I don't think you pay tax on your winnings. I'm sure someone can advise better re these

OP will only have to pay IHT on the gift if her dad dies within 7 years AND he had used his £325k nil rate band immediately prior to making the gift.

Otherwise the gift will be covered by the nil rate band.

The balance of £325k-£60k will then be available to the Estate (assuming no other lifetime gifts that have used it in the 7 years prior to death)

I would recommend you put it in an ISA, you can do £20K straight away. You can check money saving expert but I found the money box one good (5.21%) and they have a simple saver for 5%. You can make withdrawals although there are limits. Especially the ISA you wouldn’t get taxed on it so no need to worry but you’re losing out on money by just having it sat in a current account!
you could also stick some in ns&i premium bonds, any winnings from that are tax free too and you can withdraw whenever you want.

Id probably do £20K cash ISA
£20K savings account (5% interest would take you to the £1000 limit)
£20K premium bonds

Stick 20k in an isa and the rest in a high interest savings account. You will pay tax on the interest, but better than no interest at all.

If it’s not earning any interest, then you don’t have to worry about anything.

If you’re on a low wage (under £17k a year), then you can earn up to £5000 a year in interest tax free. If you earn over that on basic rate it’s £1000 a year maximum and on higher rate £500 a year max, £0 on additional rate.

This has nothing to do with Labour and I hope this wasn’t a fake scare tactic post.

Can someone please explain to me how this will work if Labour are voted in?

Currently, if you're a basic rate tax payer, you can earn £1,000 in interest in savings before paying tax (it's £500 if you're a higher rate tax payer). Neither Labour nor the Conservatives have said they will change this.

£20k in a money box isa asap. The rest in a high interest account and move another £20k over to your isa at beginning of next tax year. No tax to pay on interest from isas.

Definitely not a scare tactic. I've tried to educate myself but it's confusing. It's embarrassing to say but I don't really understand a lot of it and my friend mentioned it today as she knows I have money for a house so it's worried me.

I was aware of the inheritance tax, again not a 100% on how it works though.

I guess another question would be, what happens if you don't have the cash to pay inheritance tax (if I've already used it to buy a house)?

From your worry, it seems to me like you think you’ll be taxed on the savings themselves? That’s not the case. Any tax is only ever on interest you earn from the savings.

If it’s in a current account not earning interest then you have no tax to pay, and Labour have no plans to change this.

Take out a loan, increase your mortgage, sell the property.

https://www.moneysavingexpert.com/savings/savings-calculator/

Have a play around with this calculator. If you save your £60000 in an account at 5% interest adding only £10 a month to it ( i couldn’t leave it at 0) you’ll have over £70000 in only 4 years. Get the 20k into an isa now and another £20 k in next April and you’ll have more as no tax to pay.

If you open an account with, say, Chip you can put £20,000 in an easy access ISA and get £1,020 p/a tax free (current rate is 5.10%) and the rest in an instant access savings account at 4.84% (£2,904 p/a). You will most likely pay tax on the latter but you’ll still be better off. Both these accounts are accessible at any time without penalty, in case you decide to bite the bullet and buy.

Alternatively you could put £50,000 of the remaining money (after the ISA) into Premium Bonds (you can’t invest more than £50,000). Any winnings are tax free.

Either way - you should get that money working for you!

Give over, it's a scare tactic. If you needed to know how tax on savings works, which you claim not to, you would ask about that. Not how it might work if Labour win.

@Redflagsabounded I only mentioned labour because my friend told me earlier today that she wasn't sure who to vote for and mentioned about the tax on savings. I had no clue before that. Not really sure what your issue is tbh, and I don't have any reason to lie either

Jesus Christ - does your friend think the actual savings are taxed??

@BeanThereDoneIt yes this is what I meant, and thank you for the reply.

I'll definitely look at putting some of the money into an ISA (tbh I didn't think I'd have the money this long but there hasn't been any suitable houses so far).

Inheritance tax is payable on the deceased estate, NOT the individual to whom they've given money. Your dad's estate would be treated as if it still had the cash and taxed accordingly. You won't suddenly get a bill for inheritance tax.

I only mentioned labour because my friend told me earlier today that she wasn't sure who to vote for and mentioned about the tax on savings.

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