Some banks and financial institutions have recently increased rates to savers again. If the savings are held in an ISA this interest will be free of income tax. However, if not within an ISA wrapper, this may be liable to tax. There is a personal savings allowance available, which is either £1,000 for basic rate taxpayers, £500 for higher rate taxpayers (40% tax band) or Nil for additional rate payers (45% tax band).
Just £20,000 saved at 5% interest returns £1,000, whereas not that long ago, with interest rates at just 0.1%, the interest would have been £20. It is likely that more and more people therefore need to consider their tax position.
It gets more complex for those with lower levels of income though as there is a £5,000 starting rate for savings, so someone with income of £12,570 (equal to the personal allowance) could have £6,000 in interest and still not pay any tax! And there are further complications not covered here!
You have to register for self-assessment if your income from savings and investments is over £10,000 in a tax year.
Let us run the calculations for you and we can then advise you accordingly as to the tax position. Contact us to learn more.