People with savings exceeding £3,500 are warned about potential tax liabilities due to rising interest rates. The HMRC can automatically detect interest earned, and if it surpasses the Personal Savings Allowance threshold, additional tax will be owed. Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free annually, but this allowance reduces to £500 for higher earners. With current interest rates, even modest savings could push individuals over the limit, leading to unexpected tax bills.
People with savings exceeding £3,500 are being warned about the possibility of receiving an unexpected tax bill from HMRC . The tax authority can automatically detect interest earned on savings in bank accounts, and if the interest exceeds a certain threshold, a notice of additional tax owed will be issued.
With many fixed savings accounts currently offering interest rates of 5% or higher, individuals who invest £3,500 in such an account for three years could earn over £500 in interest. Since the interest is "crystallised" at the time of payout, the entire amount is paid out at the end of the three-year term.
Therefore, exceeding the Personal Savings Allowance by just £100 would result in a £40 tax liability. There are indeed a variety of income sources that contribute to your Personal Savings Allowance, reports the Express.
TAX SAVINGS HMRC PERSONAL SAVINGS ALLOWANCE INTEREST RATES
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