TAX on savings

As an ordinary tax payer (i.e. my earnings are well below any point at which i should pay tax at the higher rate) do I owe any tax on savings that have already been taxed at the normal (lower rate)? For example a building society account?

cheers

fj

I don't think you win anything, 22% was introduced because they created that new progressive band at 10%. Obviously the 20% taken out of interest doesn't include that lower band.

There is no "should have" about it, and no government is ever happy to "make do".

Were you to get interest from somewhere which does not deduct tax at source, you would still have only to pay 20% on it.

Capital gains are also taxed at 20%.

Bitstring , from the wonderful person Virgils Ghost said

If you are a 10% tax payer ISTR that you can reclaim the overpaid tax on what has been deducted at 20%.

Bitstring , from the wonderful person Ronald Raygun said

Yes, but this is a concession from where it used to be, when interest income was added to your other incomes and the whole mess taxed at basic rate. Maybe you are too young to remember?

In message of Sat, 22 Apr 2006, GSV Three Minds in a Can writes

No 'concession' it is the LAW

Thanks to everyone who answered

fj

Bitstring , from the wonderful person David Floyd said

Many 'concessions' are enshrined in law, especially the finance acts. You obviously haven't waded through thedocumentation, or you would have noticed many things which can only be considered concessions, like married couples allowance being retained (in mangled form) for those over a certain age, and tax loopholes associated with antique pensions schemes still being preserved (OK, many of those finally got the chop this April).

Anyway, you call it what you like, and I'll call it a concession. That way I won't be as upset as you when some future chancellor decides to set the rate back to match basic rate of income tax, or to tax dividends at 20% instead of 10%.

Again, the 20% tax on interest doesn't include the 10% progressive band. The reason the 22% band was created for income tax was because they introduced the 10% stage, hence the extra 2% on 22% to offset this lower rate further down the scale.

They can put whatever figure they like as the dividend tax rate, in reality, it doesn't make much difference unless the tax "credit" pushes you into a higher tax band. In reality, most dividends are taxed at 30%.

"Virgils Ghost" wrote

If that were the reason, then why are the tax rates on *interest* set at 10% then 20%?

According to your reasoning, the rates would have been set at 20% & 20% -OR- 10% & 22%. But they weren't - the rates are 10% & 20%...

"Virgils Ghost" wrote

Did you mean:- (A) "The reason the basic rate band was created decades ago"; -OR- (B) "The reason the basic rate was reduced down to 22% a few years ago" ?

In message of Sun, 23 Apr 2006, Virgils Ghost writes

Don't understand what you mean by this. When an individual's self assessment is worked out and the reduced rate of 10% hasn't been used up then any interest income will be subject to tax at 10% (assuming other allowances have been used up). So if it's already been taxed at 20% at source there cold be a refund due.

Does the 20% tax on interest include the 10% progression? As far as I'm aware it's just simple 20%, correct me if this is wrong.

In message of Sun, 23 Apr 2006, Virgils Ghost writes

The rates of tax (for chargeable income after allowances) for individuals are as follows:

Interest: 10%,20%,40% Other earned and unearned income: 10%,22%,40% Dividends: 10%(deemed to have been paid), 32.5%(10% deemed to have been paid) Capital Gains: 20%,40%