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Britons paying too much tax on savings

Britons paying too much tax on savings

Category: Savings

Updated: 03/04/2009
First Published: 03/04/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Millions of Britons are unnecessarily paying too much tax on their savings.

Almost half of us claim that not paying tax on interest is an important factor in choosing a savings account.

However, an analysis of British couples' saving habits shows the taxman is still getting his hands on too much of our money.

Two and a half million people are losing out on too much of their joint savings by keeping the majority of their funds in an account in the name of the partner paying the most income tax, according to Abbey Savings.

Another 3.8 million could be paying too much by keeping savings in a joint account when one partner is a low or nil rate tax payer.

Savvy savers should keep their joint finances in an account in the name of the low taxpayer in order to pay a basic rate of tax on interest (20 per cent), as opposed to the higher rate (40 per cent).

"If one partner is actually a lower rate tax payer, or in fact pays no tax at all, it makes sense to hold the bulk of their money solely in their name - reducing the slice of savings eaten up by the tax man," said Reza Attar-Zadeh, director of savings and investments.

"At a time when every penny counts, there is no point wasting money by unnecessarily paying too much tax on savings."

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