MARTIN Lewis’ MSE has issued an urgent warning about a “tax trap” which could leave savers being hit by a hefty bill. In the latest MoneySavingExpert.com (MSE) newsletter, Martin …
This applies even for interest paid annually into a fix, as you can't access it which therefore means it's counted that you got it all at maturity.
"So for a long, say, three-year fix, you can be taxed as if you earned a lot of interest all at once.", basic taxpayers can earn £1,000 a year of interest tax-free while higher taxpayers can earn £500 a year.This could mean you pay tax you wouldn't have done if the interest was paid more frequently. "In fact, it'd take just £7,000 in the top three-year fix paid at maturity to bust the £1,000 limit - half that for a higher-rate taxpayer. "This can help them avoid paying unnecessary tax.With your current rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research websites like MoneyFacts and price comparison websites such as Compare the Market, GoCompare and MoneySupermarket will help save you time and show you the best rates available.
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