Uptowngirl Posted January 3, 2013 Share Posted January 3, 2013 I just wonder why people are taxed on interest gained from bank and building society accounts. You hand over your money so that banks can loan it to businesses etc and the bank pays you a pittance of interest usually less than half the rate of inflation. So when you go to get your money back there is less in real terms than you deposited. Then to add insult to injury the tax man takes 20% of the interest gained. WHY? Does this encourage people to save for their old age? It seems to encourage people to spend their money and hope the state picks up the tab for their old age. Link to comment Share on other sites More sharing options...
barleycorn Posted January 3, 2013 Share Posted January 3, 2013 Because it's taxable income. If, however, you earn below the tax threshold you can claim it back. jb ETA: And no it doesn't discourage people saving for old age. Anyone with any sense would either stick their cash in a private pension and thereby reduce their taxable income with a far greater return than any bank account can give or throw it into an ISA (there are also other methods of saving). Link to comment Share on other sites More sharing options...
alchresearch Posted January 3, 2013 Share Posted January 3, 2013 WHY? Does this encourage people to save for their old age? It seems to encourage people to spend their money and hope the state picks up the tab for their old age. I'd say the terrible interest rate discourages saving, not the taxed aspect. It wasn't so long ago that even the most basic of current accounts would offer 5 or 6%. Now it's less than 1%. Link to comment Share on other sites More sharing options...
maxmaximus Posted January 3, 2013 Share Posted January 3, 2013 I just wonder why people are taxed on interest gained from bank and building society accounts. You hand over your money so that banks can loan it to businesses etc and the bank pays you a pittance of interest usually less than half the rate of inflation. So when you go to get your money back there is less in real terms than you deposited. Then to add insult to injury the tax man takes 20% of the interest gained. WHY? Does this encourage people to save for their old age? It seems to encourage people to spend their money and hope the state picks up the tab for their old age. Because governments like wasting money so need to get their hands on as much as possible. They are also not very bright because they want us to save for our retirement and spend all our money to keep the economy going at the same time. But there are ways round paying tax on saving. Link to comment Share on other sites More sharing options...
Uptowngirl Posted January 3, 2013 Author Share Posted January 3, 2013 Because it's taxable income. If, however, you earn below the tax threshold you can claim it back. jb ETA: And no it doesn't discourage people saving for old age. Anyone with any sense would either stick their cash in a private pension and thereby reduce their taxable income with a far greater return than any bank account can give or throw it into an ISA (there are also other methods of saving). But didn't Gordon Brown introduce a tax on pension funds dividends that rather knocked the shine off pensions. As the stock market has hardly budged this past decade many pension funds are on the brink of not meeting their obligations. Link to comment Share on other sites More sharing options...
Magilla Posted January 3, 2013 Share Posted January 3, 2013 But didn't Gordon Brown introduce a tax on pension funds dividends that rather knocked the shine off pensions. Indeed, IIRC to the tune of £6bn a year. As for the OP's question, it's income, income is taxable. Link to comment Share on other sites More sharing options...
spilldig Posted January 3, 2013 Share Posted January 3, 2013 I'd say the terrible interest rate discourages saving, not the taxed aspect. It wasn't so long ago that even the most basic of current accounts would offer 5 or 6%. Now it's less than 1%. Exactly put, alchresearch. Link to comment Share on other sites More sharing options...
Jeffrey Shaw Posted January 3, 2013 Share Posted January 3, 2013 As for the OP's question, it's income, income is taxable. But not always: ISAs and SIPPs aren't, for instance. Link to comment Share on other sites More sharing options...
Nagel Posted January 3, 2013 Share Posted January 3, 2013 Yes, put any savings in a Cash ISA. You can put £5680 a year into one and it's not taxed. However interest rates are so ridiculously low at the moment that even untaxed you will struggle to find any account which will beat inflation so the value of your savings will steadily decline. It's not a good time to have any assets in cash. Link to comment Share on other sites More sharing options...
I1L2T3 Posted January 3, 2013 Share Posted January 3, 2013 But didn't Gordon Brown introduce a tax on pension funds dividends that rather knocked the shine off pensions. As the stock market has hardly budged this past decade many pension funds are on the brink of not meeting their obligations. Arguably he removed an unfair subsidy for private pensions. People should not just be angry with Gordon Brown but also with the people who mismanaged (high fees, appalling performance) private and corporate pension funds, and for their employers for using Gordon Brown's actions as an excuse to attack corporate pension funding. No discussion of what has happened to pensions is complete without discussing the actions of employers and the pension funds themselves, which in many cases has been despicable. ---------- Post added 03-01-2013 at 18:12 ---------- I'd say the terrible interest rate discourages saving, not the taxed aspect. It wasn't so long ago that even the most basic of current accounts would offer 5 or 6%. Now it's less than 1%. Banks do not want you to save. They want you to take on debt. Link to comment Share on other sites More sharing options...
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