Different investments have different tax treatment. If you'd like more detailed information please speak to us.
Tax on savings accounts
Previously, if you were a taxpayer you had tax automatically deducted on the interest you earned from your savings.
However, in April 2016 a new personal savings allowance was introduced. This means:
- Basic rate tax payers can earn up to £1,000 interest on their savings without having to pay tax.
- Higher rate tax payers can earn up to £500 worth of interest tax-free.
- Anyone who earns more than £150,000 a year does not benefit from the personal savings allowance.
- Any interest exceeding your allowance is liable to income tax.
There is also zero-tax band on the first £5,000 of savings interest.
This means that someone with a total taxable income of less than £17,570 might not pay tax on any savings income.
For more information on Tax on savings interest visit GOV.UK.
Claiming back tax
If you think you’ve overpaid tax on your savings, you can claim it back by filling in form R40 on GOV.UK.
Make the most of your personal income allowances
If you have a non-earning spouse, or civil partner, you can switch income-earning investments to help your tax bill. Everyone has a personal allowance of £12,570 in the 2023/24 tax year. This means you can earn this amount without paying tax.
Use capital gains tax allowances wisely!
Everyone can make up to a certain amount of profit each year from selling an asset/investment (such as Unit Trusts/OEIC’s) or personal property (such as shares or a second home for example) without paying ‘Capital Gains’ tax. The current allowance for each of us, for tax year 2023/24, is £6,000. Make any more than that, and it is likely you will pay tax. Current rates of tax are 10% or 20% (depending on your own tax position) although for transactions involving the sale of second homes or carried interest the rates are 18% or 28% (depending on your own tax position). Income from an OEIC, whether distributed or re-invested, is liable to Income Tax.
You could think about switching investments to a spouse's or civil partner's name to take advantage of both of your allowances. This can be a complex area however, and you should always seek professional advice where possible.
Individual Savings Accounts (ISAs)
You pay no personal income tax or capital gains tax on any growth in an ISA, or when you take your money out. You can save up to £20,000 per person in the 2023/24 tax year, in an ISA. Find out more about ISAs in our Guide to ISAs.
Investments that pay interest (e.g. government and corporate bonds), or rental income (such as some property funds) provide 100% tax-free income if held within an ISA and therefore offer tax benefits for everyone.
All individuals are eligible for a £1,000 tax-free Dividend Allowance.
Dividends received by pension funds or received on shares within an ISA will remain tax free and won’t impact your dividend allowance.
Also, any profit you make when selling investments in your Stocks and shares ISA is free of Capital Gains Tax.
Any losses made on your investments in your Stocks and shares ISAs can’t be used to offset capital gains on your other investments.
Please be aware that the impact of taxation (and any tax reliefs) depends on individual circumstances. Information about tax rules is based upon our current understanding, and is liable to change in the future.
Consider National Savings & Investments
You can shelter money in a tax-efficient way within this government-backed savings institution. For details on Premium Bonds, Index-linked Savings Certificates and Fixed Interest Savings Certificates, go to the National Savings & Investments website at www.nsandi.com.
Speak to a specialist
Taxation on investments can be complex so we recommend you speak to us for proper advice.
