Anyone with a savings rate has been urged to “lock in” for a free £47. Under current deals after Christmas, you can get 4.7 per cent on a one-year deal and 4.2% on a five-year deal, so in the first year on every £1,000 saved you will earn £47 or £42.
But think about whether you owe tax on your savings, says Emma Sterland, the chief financial planning director at the wealth management firm Evelyn Partners. Ms Sterland says many savers are probably still getting used to the idea that the interest on their deposits may be taxable.
“In the era of rock-bottom interest rates, it was only savers with very large deposits who were in danger of breaching the personal savings allowances of £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers,” she says.
READ MORE 16 counties in England face MORE snow this week with ‘five inches’ hitting
“As savings rates climbed through 2022 and 2023, more people will now be in the position where they have to declare income from savings via self-assessment.” And don’t forget to pay the tax you owe, says Charlene Young, a pensions and savings expert at the investment platform AJ Bell.
“Make sure you’ve paid what you owe by midnight on 31 January,” she says, ahead of the self assessment deadline on January 31. “If you don’t, you’ll start to accrue daily interest from 1 February. The annual interest rate charged by HMRC is a whopping 7.25%.”
Young adds: “If you’re having difficulty paying, you might be able to agree a payment plan online with HMRC as long as you owe £30,000 or less. You can also apply to reduce your payments on account for the next year if you think your earnings will be significantly lower than before.”
Helen Thornley, a technical officer at the Association of Taxation Technicians, said: “If you are filing yourself online using HMRC’s filing system, make sure you have not just completed but also submitted your return. Every year, some people get to the end of their tax return and think they have completed it when they haven’t.
“As part of the final submission process, it is necessary to enter your login credentials again – so make sure you keep going through HMRC’s online filing system until you are presented with your submission reference, and the completion box at the top of the screen says 100%.”