Martin Lewis says avoid paying tax with two fully | European Markets

Cash professional Martin Lewis has revealed two absolutely legal strategies for shielding your self from paying tax in your financial savings.

HMRC routinely provides a Private Financial savings Allowance to everybody who works and pays Revenue Tax, so these incomes more than £12,570 a yr.

That is the quantity you may make by way of curiosity in your financial savings accounts, paid to you by your bank, in a given tax yr.

Those that earn much less than £50,270 can earn £1,000 in financial savings curiosity earlier than they owe tax, however these incomes above that may solely earn £500, and people incomes £125,000 or more should pay tax on each penny of their financial savings.

And with many financial savings accounts offering as a lot as 5% curiosity proper now, it’s simple to go over the restrict with simply £10,000 to £20,000 of financial savings, relying in your income.

That’s why Martin Lewis has instructed his followers about two absolutely legal strategies to keep away from tax on financial savings curiosity.

Martin mentioned that if you happen to file a tax return via the HMRC self evaluation tax return system, which you must do if HMRC asks you to, you then merely put the full quantity of curiosity you earned in your tax return.

However those that don’t usually need to submit tax returns, ie these with regular PAYE jobs, then as long as you’re incomes much less than £10,000 off of financial savings curiosity a yr, you don’t need to do something as a result of the banks routinely ship the data to HMRC so it could alter your tax code to change what you pay.

However if you wish to keep away from paying the tax, Martin then defined that you need to use a money ISA to legally shield your self from paying tax on financial savings.

He mentioned: “A cash ISA is simply a savings account you don’t pay tax on. You can put £20,000 in per tax year. Once you put the money inside a cash ISA, it is protected from tax.

“They’re just a savings account in a special tax wrapper you don’t pay tax on. The money in there, you don’t pay tax on it and it doesn’t count towards the interest in the Personal Savings Allowance.

“This is on top of that. As long as it stays inside the Cash ISA. You can put £20,000 in this tax year, then £20,000 in the next tax year, and if you’re lucky enough to max it out each year, you can protect more and more of your savings inside a cash ISA without having to pay tax on it.”

Martin added that relying on how a lot you earn, you possibly can shield 20% of your curiosity being taken away by the taxman, or 40% to 45% if you happen to earn more than £50,000 or £125,000.

The second technique is Premium Bonds.

Martin continued that Premium Bonds, run by NS&I, are additionally a good technique to legally keep away from paying tax on financial savings, particularly when you have already maxed out your Private Financial savings Allowance and your money ISA restrict of £20,000 for the yr.

He added: “The prizes that you get from Premium Bonds are also tax-free. I would always go for a cash ISA first, with the rate on Premium Bonds for most people you will earn less than you would in a top cash ISA. But if you are going to be paying tax on your savings and you’ve got a good whack you could be putting in Premium Bonds then they could become a pretty interesting option for you.”