Your money-making expert. Financial journalist, TV and radio personality.
It looked like the Chancellor gave us a £100,000 Cash ISA on Wednesday.
He said that from April we won’t be charged savings tax (20%) on any interest we make on our savings up to a limit of £1,000.
Now, think about it. How much are you making on your savings right now?
It’s likely to be around 1% at the most, unless you have a savings bond and I bet even that’s not brilliant.
Even the best savings rates on easy access accounts are just 1.25%. Many people have 0.5% or less.
So to get anywhere near £1,000 in interest in a year you will need around £100,000 in your savings accounts. Who’s got that?
No wonder the Chancellor said this would affect 95% of savers.
It all sounds ridiculously generous of him. Something that only a Chancellor fighting a general election would throw at the populace.
That’s what I thought at first, then I thought again…
…if most of us are on no more than 1% interest, and very few of us have anywhere near £100,000, then the tax revenues on this interest, even at 20%, can’t be too impressive right now. It’s not like dropping VAT, for example, which is a HUGE earner for the Treasury and pretty much guaranteed income so long as we keep spending.
Not only that but…think of this…
There is a strong possibility that the Bank of England could drop their rates from 0.5% to 0% OR EVEN LOWER.
Well…inflation is low and likely to get lower.
If it does and if the Monetary Policy Committee considers that we are are not spending enough in the shops, they could drop rates to 0%.
If things keep dropping they could reduce it to a minus figure.
It’s been done in Switzerland, Sweden and Denmark. There’s nothing to say it couldn’t be done here.
So, think about this…if Base Rate drops to 0%, how little are we going to make on our savings then? And how little would the tax on that paltry interest be?
If the rate drops to a negative amount, we will find ourselves PAYING the banks to keep our money.
Consider that for a moment.
If we end up paying the banks to hold our savings, there really will be ZERO tax income for the Government on our savings.
…just how much of a giveaway is this £100,000 Cash ISA now?
…and just how much does George Osborne know about where interest rates will go in the next few months?
It’s all very interesting, what with a general election coming up, oil prices looking like they will stay low for a while and the supermarket wars showing no signs of abating.
Inflation seems to be set to stay low and that means rates lowering – great for borrowers, nasty for savers.
Hmm, interesting times!