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!

OP - innocent enough post perhaps but this is how people’s votes can be influenced - based on either lies or completely misunderstanding (as you have).

Media thrives on soundbites.

But please make your money work for you. I assume you're eligible for the 1,000 per tax year interest free on savings (just off the info in your OP). Open an easy/instant access saver somewhere and get free money every month! Chase is currently offering between 4.1% and 5.1% and it's easy to open. It's a lot of money to say no to!

You could have had that money in an instant access savings account earning £200ish a month at 4%. Why in gods name have you got it in a current account if you're low income and could therefore do with the extra money??

Your friend is nuts if they think it's the actual savings that are taxed - hopefully I've misunderstood that!

Who knows what labour will do with savings. They aren’t likely to let people know in advance as it might piss people off. They could easily introduce a wealth tax. I would not vote for them in a million years.

@Merryoldgoat In all honesty I have no idea what she thinks. It was a quick call and we didn't really get into it, but after she mentioned it I had a Google and found some information about it.

Stick some in an isa and some in premium bonds. You might win the million!!

You won’t be taxed on the capital, only on the interest and then only interest above a certain amount so put as much as you can into an ISA or a LISA. Ask your bank to send you a letter confirming how much interest you’ve received over the last year so you can keep track of it.

@BarryCantSwim I understand, sorry if it came across like I was trying to scare people. I haven't got a clue myself which is why I asked for a bit of advice.

That makes even less sense that she would randomly mention she “doesn’t know who to vote for” but immediately and falsely scaremongering on some random labour tax policy, all within a very short phone call?

@FriendlyNeighbourhoodAccountant that's good to know and a relief, thank you.

You need to do two things,

1. put it in tax free savings either an Instant access ISA, or a fixed term ISA for a year or Premium bonds. You can put 20k into an ISA and 40 k on PBs or 50 k in PBs and just 10 k in an ISA. This will earn you about 4.4% a year which is £2600 of free money a year ! Do this today before interest rates on ISAs change as a result of the election
2. look up how much tax you have to pay if you dad were to die in the next 7 years and take account of that when you buy. So keep back enough money to pay this without selling your new house. its 40% for the first three years, so make a note of date he gave you the money and don’t commit more than 60 % till that date. 60% of 60k is 36k plus your interest which can safely be used to use as a deposit. the rate then slowly drops to 0% at 7 years and one day.

@Labtastic I'll definitely look at an ISA or savings account now. I didn't think it would take this long to find a house that's why I've just kept it in a current account.

Thank you @isthewashingdryyet

I don't think I'll have the option to keep some of the money aside as houses in my area are pretty expensive so I need all I can get unfortunately

OP your ignorance on this has cost you around £2000 (the 5% interest you could have earned so far on this money if you'd put it in an instant access savings account or ISA while you decided what to do with it).

Hopefully that will be incentive enough to educate yourself so you don't get confused by nonsense that people tell you or you read online.

Look at Moneysaving Expert and Meaningful Money to learn about money and the financial flowchart for an outline of what to do in what order.

https://ukpersonal.finance/flowchart/

Number 2 is misleading. It depends entirely on the size of her father's estate. Very few people actually pay inheritance tax.

That’s not really an option though.

Plus if the OPs DFs estate is sufficiently large to attract IHT and he dies within the next seven years, it's highly likely she'll inherit a sum sufficient to pay any tax due, unless he decides to leave all his money to someone else of course.

His estate will have to pay tax. Inheritance tax is paid out of the estate before it*s distributed to beneficiaries. Money gifted within the last 7 years is considered part of the estate.

This. Some of the advice on this thread is terrible. OP, look into the inheritance tax side of things properly. Do not think you need to keep back 40% of your house deposit for god's sake.

OP won’t have to pay IHT regardless - her father’s estate will have to pay it. They don’t come to the recipient for the tax.

Unless or until labour changes any of the tax rules nothing changes, if they do I don't think it can be retrospective. We will see what they actually do when in power, who knows they have been very vague so far.

Well done for being brave enough to ask, we don't know this stuff without finding it out and here is as good a place as any. Who knows who will find this thread and learn from the replies.

Blah blah blah

Doesn’t matter what government is in, you pay tax on the interest over your personal allowance. It’s not going to change overnight and inheritance tax doesn’t apply to that low an amount, it’s much higher the amount it’s applicable on. Just put that money into savings as the rate is good,

@ehhdh Who knows what labour will do with savings. They aren’t likely to let people know in advance as it might piss people off.

You’re right from midnight on the 4th Labour are going to transfer everyone’s savings to the lizard people.