A warning has been issued to UK savers with at least £3,501 in their accounts.
According to His Majesty’s Revenue and Customs (HMRC), individuals can earn up to £1,000 in interest without paying tax, depending on their Income Tax band. This is known as the Personal Savings Allowance.
To determine your tax band, you need to add any interest earned to your overall income. Those earning over £50,000 see their allowance reduced to £500, according to the Express.
For savers looking at long-term options, fixed rate bonds may be a consideration.
ALSO READ: US inmate executed by firing squad for first time since 2010
These accounts offer a steady interest rate over a fixed period, but the money is locked away, making early withdrawals difficult or costly. Because of their structure, they often come with higher interest rates than instant access accounts.
If you save £3,500 in a fixed savings account at 5% for three years, your interest could exceed £500. For high earners, any interest over their allowance is taxed at 40%.
Fixed rate bonds, also known as fixed term savings accounts, typically require a lump sum deposit at the start, and the term can range from six months to five years.
While longer terms may offer better interest rates, early withdrawals can lead to penalties. Banks like NatWest offer fixed rate savings options for one or two years.
Before committing to a fixed savings account, it’s essential to weigh the benefits of higher interest rates against the restrictions on accessing funds.
(Yahoo)
and then