Understand tax on savings
Nearly two thirds (63%) of Brits don’t realise basic-rate
taxpayers pay 20% on any interest earned from standard
savings accounts straight to HMRC.
One in seven mistakenly think a basic-rate taxpayer pays no
tax on a standard savings account at all, while 12% think
they would have to pay tax on cash Isa savings.
In fact, more than a third (37%) didn’t realise there’s no
tax to pay on interest earned in an Isa.
More men than women were aware of savings tax, at 43%
compared to 32%. And unsurprisingly, knowledge increases
with age. Six out of 10 18-24 year olds didn’t know about
cash Isa savings being, while 72% of over-55s did.
Lack of understanding
Darren Bailey, at Nationwide Building Society, which put
together the numbers, said: “This lack of understanding that
interest is tax-free in an Isa but not on a standard savings
account could mean many savers are giving more money to the
taxman than they need to.”
He added: “Nobody likes paying more tax than they need to,
so savers should ensure they fully utilise their Isa
allowance before opting for a standard savings account.”
Up until 5 April 2014, £5,760 can be deposited into a cash
Isa, and £11,520 in a stocks and shares Isa.
From 6 April to the end of June those figures rise to £5,940
and £11,880 respectively.