UK people: Do we have to pay taxes to save money while we earning interest?

Question

Let's say im not working and i've got money saved (let's imagine i've got a large amount of money) and i'm earning interest on that saved money, do i have to pay tax for it? If yes, how much?

And another question, is it true that when you buy a flat in England and you want to rent out the flat that you bought, you have to pay 33% of tax of the money that you earn to the government?

Answer 1

If you have no other income except for interest on savings , you will only pay tax after the individual allowance for the year is reached . So you would have to have lots of money in the bank to reach this limit . And if you did have all this money your accountant and financial manager would be looking to put it into investments where tax was minimal

If the flat is the only one you own and is not a 2nd home then I don't think you are taxed , but you certainly are if it is a 2nd or even more than a 2nd home

Answer 2

If  you are not working and even if you are taxation starts as soon as the interest from your savings reaches £ 5300per year,    Income from property starts at the same amount after deductions for bona fida expenses running the are taken in to account

Answer 3

Yes you have to pay tax on earned interest.

Answer 4

Yes you pay tax on your savings unless it is invested in an tax free ISA account

if you rent out a home you pay Income tax on the earnings of 22% (the sames as the tax on eranings) up to a limit of earning of 34,600 and 40% on earnings over this amount.

Interest on your savings is at the same rate as these bands (22% up to 34,600 and 40% 34601+) Except the first 2230 in savings is taxed at 10%

Also if you then sold your rented property you would pay Capital Gains Tax of 18% for any profit over 9,600

Answer 5

The Joker has given you the allowances/tax rates for the last tax year. Currently you can have interest of £5435 before you have to pay tax, providing you have no other income. That is changing in September, when the personal allowance goes up to £6035, and becomes retrospective back to 6th April. I assume you don't have enough interest to put you into the 40% bracket, so you would pay 20% on what is over the personal allowance. The tax would be deducted at source, and you would have to claim a repayment each tax year. You cannot register for gross interest on any account if your total income is more than the amount of personal allowance.

Most people in this situation would be investing in stocks and shares, rather than leaving money in interest accounts. If your income was only dividends (which are taxed at source at 10%) you cannot get it repaid, whatever your other circumstances.

You can find tax allowances and rate bands on www.hmrc website. If you did go into the higher tax bracket, you would have to complete an annual Tax Return, and pay the extra tax direct to HMRC.