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Rising Interest Rates Provide A Boost For Savers

But they may need to pay more tax ...


Posted by Helen Beaumont on 22/11/2023 @ 8:00AM

As interest rates continue to rise in the UK, savers may feel the pinch when it comes to paying tax on their savings. However, with some strategic planning and knowledge savers can actually benefit ...

Don't let rising tax rates deter you from saving; use them to your advantage!

Don't let rising tax rates deter you from saving; use them to your advantage!

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The current economic climate in the UK is providing a unique opportunity for savers to maximise their wealth. With some strategic planning and knowledge of the tax landscape, savers can take advantage of rising rates without paying more tax.

Here's how:

  1. Utilise Tax-Free Savings Options

    One of the best ways for savers to take advantage is by utilising tax-free savings options. In the UK, there are several tax-free savings options available, such as Individual Savings Accounts (ISAs) and National Savings and Investments (NS&I) products.

    ISAs allow individuals to save up to £20,000 per tax year without paying any tax on the interest earned. NS&I products, on the other hand, offer competitive interest rates and are backed by the UK government, making them a safe and tax-free option for savers.

    By utilising these tax-free savings options, savers can maximise their savings without worrying about paying more tax.

  2. Consider Pension Contributions

    Pension contributions are another tax-efficient way for savers to boost their savings. By contributing to a pension scheme, individuals can benefit from tax relief on their contributions, meaning they can save more without paying as much in taxes.

    For example, if you are a basic rate taxpayer, for every £100 you contribute to your pension, the government will add an additional £25 in tax relief. For higher-rate taxpayers, this amount increases to £40. This means that savers can save more for their retirement while also reducing their tax bill.

  3. Be Mindful of Tax Bands

    Savers need to be mindful of the different tax bands and how they may affect their savings. In the UK, there are different tax bands for income tax, capital gains tax, and inheritance tax. By understanding these tax bands, savers can make strategic decisions about where to allocate their savings to minimise their tax liability.

    For example, if you are a higher-rate taxpayer, it may be beneficial to invest in tax-free savings options or pension contributions to bring your income down to the basic rate tax band. This can help you save more without paying as much in taxes.

  4. Seek Professional Advice

    Navigating the complexities of the tax system can be overwhelming for savers. That's why it is important to seek professional advice from a tax adviser or financial planner. They can help you understand the current tax landscape and provide personalised advice on how to make the most of your savings.

    A tax adviser can also assist with tax planning, ensuring that you are taking advantage of all available tax reliefs and allowances. This can help you save more in the long run and mitigate the impact of frozen thresholds and rising tax rates.

By utilising tax-free savings options, considering pension contributions, being mindful of tax bands ... and seeking professional advice ... savers can ride the tax tide and maximise their savings in the UK.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about using the rising interest rates to your saving advantage, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.