ITV's Martin Lewis issues warning to people with £10,000 savings
Martin Lewis, the well-known money saving expert, has delivered a stark warning to Britons harbouring savings, indicating they could be slapped with a significant tax demand. Specifically spotlighting individuals with £10,000 put away, Lewis highlighted that they might find themselves owing cash to the taxman due to current interest rates offered by banks.
On air during The Martin Lewis Money Show Live on ITV, he pointed out that the landscape for taxation on savings "really has changed very much" in recent years. This is due to the fact that savings account interest rates have rise from around one percent to approximately five percent.
While this boost seemingly benefits savers, it also acts as a double-edged sword, increasing the number of people whose savings interest is susceptible to tax. As reported by Express.co.uk, Lewis detailed that a basic rate taxpayer in with £20,000 in savings may find themselves owing tax within a 12 months.
READ MORE: Oodie's early Black Friday deals see everything slashed in price by mega 50% discount
READ MORE: Vera's final series to air sooner than expected - with huge guest stars
Furthermore, a higher rate taxpayer, an individual pocketing £50,270 annually, could be liable to pay tax with just £10,000 in savings. “So look, savings tax is back for many,” he said. “When you get interest on your savings, it is eligible for income tax. It counts as income.”
Luckily most people can earn up to £1,000 a year interest without needing to pay tax. He continued: “But you get a Personal Savings Allowance. What this means is a basic rate taxpayer can earn £1,000 a year of interest and you don’t pay tax on it.
"It can be in any form of savings account that you like. As a higher 40 percent taxpayer, you can earn £500, as a top 45 percent taxpayer if you earn over £125,000 a year you don’t get one of these."
READ MORE: Martin Lewis warns drivers to beware of car insurance mistake costing Brits eye-watering sums
"So what does that mean in practice? So if you take that top five percent figure, as a basic rate taxpayer if you have over £20,000 in savings at five percent, you would earn more than a grand of interest so everything above that would be taxed."
"As a higher rate taxpayer it’s £10,000. So for those people saving £100, £1,000, £2,000, it’s irrelevant to you if you’re a basic rate or higher rate taxpayer. For those people who’ve got savings that get into the tens of thousands of pounds, tax starts to become more important."
"And the reason it’s come back is, when interest rates are one percent, to earn £1,000 of interest you needed a hell of a lot in savings. Now they’re five percent, you need a fifth of it, so it really has changed very much."
