FlightMan

My missus has 7k in savings in a high interest account. Its our holiday/emergency fund.

Is she liable to tax on that, and if so, how much? And how is it deducted?
Oh, she's a basic rate tax payer, she just has a part time job.

Ta.

stilover

She'll get taxed on the Interest paid by her bank, on her savings.

Unless It's in a Tax free account that is.

jonnyh

The bank will automatically take the 22% basic rate income tax and pay it to gordon.

How much does the part time job pay? She has an allowance of £5,035 (this tax year) before she has to pay anything. The next £2150 is at 10% and then 22% up to £33,300.

So if her total income including the interest is less than £7,185 the bank are taking 12% too much tax. You can reclaim that off gordon (I think for a few years back as well 3?)

EddScott

Tax on bank and building society accounts : Directgov - Money tax and benefits

You don't pay income tax on savings (20%)

jonnyh

My mistake. The taxable amount is however calculated on the basis of the income tax allowances (and then taxed at 20%)

Robert Rosario

She could tranfer 3K into a Cash ISA in this tax year in her name, and another £3K to a Cash ISA on 6th April 2007 to get £6K tax free risk free instant access savings, unless of course she has done that already.

orbix

Can't you stick the whole lot into a Maxi instead?

EddScott

You could do. However, say for instance she does not earn enough to pay basic or even starting rate it won't make much difference putting the money into an ISA because its tax-free and she won't see the benefit.

In that case, if he hasn't done an ISA this year, put it in his name so he gets the benefit.

Or if they are both tax payers and have no other investment money, split the money between them, take out mini cash ISAs for 3K each and maybe look at NS&I products for the remaining £1k - or go on holiday with it

edit - none of the above takes into account the OPs attitude to risk btw