Latest news with #higherratetaxpayers
Telegraph
3 days ago
- Business
- Telegraph
Scotland's fiscal calamity is a harbinger for all of Britain
It should be noted that this particular tax break was much cited by Labour when defending its decision last autumn to make farms subject to inheritance tax. What are they complaining about, some ministers said, when farms can still be handed down from father to son tax-free via the seven-year rule? Now, even this concession seems to be in the Chancellor's crosshairs. Wealth and aspiration are under attack across the UK as a whole, not just in Scotland. But it's even worse north of the border, where higher-rate taxpayers pay significantly more than their English counterparts on a greater proportion of their income. The quid pro quo for a more highly taxed economy is meant to be better public services, but you'd be hard-pressed to argue this is the case in Scotland. Total public spending last year at 52pc of GDP is at Scandinavian levels, but without Nordic-style welfare and services. NHS waiting lists are longer than much of the rest of the UK, social services are a disgrace, life expectancy is lower and even educational standards – once the highest in the UK – have slipped badly under Scotland's high spending regime. State education in Edinburgh is so poor that one in four families makes the financial sacrifices needed to send their children to privately funded independent schools, far higher than the UK average. Now they face the additional cost of VAT on school fees, though that one is down to Westminster, not Holyrood. And to be fair, also down to Westminster is the completely insane decision to essentially close down the North Sea oil and gas sector in pursuit of the net-zero pipe-dream. It might have been SNP policy too, but for an opportunistic change in stance just ahead of the general election aimed at saving seats in Aberdeen and beyond. The Scottish Government's current position is now a more nuanced one in which new licences for development would be assessed on a case-by-case basis, rather than the current outright ban imposed by Westminster. It's one of the few things that Holyrood seems to have done right, even if, with the overarching decision made down south, it makes no difference to the outcome. In any case, the ban steepens Scotland's fiscal challenge. Offshore oil and gas provide some of Scotland's highest-paying jobs; Ed Miliband's assault on the sector threatens lasting damage to income tax receipts, with the growth in renewables unlikely to provide a complete substitute. The smart thing to have done in maximising jobs and revenues would be to allow the two industries to run side by side, but when did either Westminster or Holyrood last practice common-sense politics? As it is, Scotland is in the same rut of rising taxation, excessive spending and declining public services as the rest of the UK, but magnified several times over. The SNP offers no answers on how it would correct the shortfall in the public finances should it ever succeed in freeing Scotland from the English teet. You might imagine that the cause of Scottish independence would have been finished for a generation or more by the SNP's inept record in government, topped off as it was by the tragicomedy of Humza Yousaf's short-lived reign as first minister. But then along came Reform UK, which threatens to split the unionist vote and thereby gives the SNP another leg up in next year's Holyrood elections.
Telegraph
05-08-2025
- Business
- Telegraph
2.6 million people to be stung by savings tax
More than 2.6 million taxpayers will be hit with bills on their savings this year, HMRC figures show. Frozen tax thresholds and higher interest rates mean tens of thousands more savers will earn enough interest on their funds to pay a bill. In the 2025-2026 tax year, 2.64 million savers will face a tax bill, up by over 120,000 from 2.52 million last year, according to HMRC predictions shared under Freedom of Information rules with AJ Bell. Some 1.15 million basic rate taxpayers will be stung on their savings. Approximately one in eight higher-rate and 45pc of additional-rate savers will also be hit with a bill. The average saver will pay £2,300 in tax on the interest their savings earn this year, according to AJ Bell's analysis. It means HMRC is forecast to rake in more than £6bn from savers. This is up from £1.4bn in 2020-21 when just 800,000 were hit with a tax bill. Savings tax is paid on interest earned over the personal savings threshold. It is charged at the taxpayer's income tax rate, with basic rate taxpayers able to earn £1,000 before they attract a bill. This means a basic rate taxpayer who has £20,000 in a savings account with a 5pc interest rate would be liable for a bill. For those on lower incomes, the starting rate for savings adds an extra allowance of up to £5,000. For higher-rate taxpayers, the personal savings allowance is £500. Additional-rate taxpayers, those who earn more than £125,140, do not benefit from a tax-free allowance, although all money held in Isas is protected from tax. The allowance has been frozen for more than nine years. Laura Suter, of AJ Bell, said: 'These numbers highlight how the rising tide of interest rates has swept hundreds of thousands more savers into the tax bracket. 'The Government may be benefitting from increased revenue, but many ordinary savers are worse off. Using tax wrappers like cash Isas or investment Isas is now more important than ever to protect your savings from the taxman.' The trend has been driven by a combination of higher interest rates, which allow savers to make more from their money, as well as frozen allowances. The average one-year fixed savings rate was hovering at 4pc on Monday, according to Moneyfacts. The average easy-access rate was sitting at 2.68pc. Savings rates have been slowly dropping since the Bank of England began to cut the Bank Rate from its high of 5.25pc in August last year. A further cut is expected this week. Income tax thresholds were frozen between 2021 and 2028 by the previous Conservative government. The policy has dragged millions more taxpayers into higher brackets as inflation pushes up incomes. The figures come amid speculation about the future of the cash Isa, after Chancellor Rachel Reeves signalled she was considering cutting the £20,000 tax-free limit in order to stimulate retail investment. But after a significant backlash from building societies and savers, an announcement on the future of the limit, which had been expected at a City speech in July, was delayed. A potential cash Isa raid is not the only tax grab that has been mooted this year. In documents published alongside the Spring Statement, HMRC said that data being shared by banks and other savings providers was 'unreadable' in as many as one in five cases. Ms Suter said: 'HRMC says it cannot reconcile bank account interest with taxpayer data in around a fifth of cases, costing hundreds of millions in uncollected tax revenue. 'While that's a win for the lucky taxpayers who are let off the hook by HMRC's systems, it illustrates that the current approach is error-prone.' Savings providers will be required to collect National Insurance numbers from the majority of savers in future in order to match accounts with HMRC data, the Government said in response to the consultation in July. The Treasury was contacted for comment.
