Money expert Martin Lewis has shared an ‘unbeatable’ interest rate on savings – and a totally legal method to avoid paying tax on it.
Martin Lewis returned with another batch of top financial savvy this week as he told his podcast listeners about a Nationwide offer which will give you a market leading 5.5 percent interest rate on savings, which is higher than other top offers like Chase’s 5.1 percent.
The offer, which is open to Nationwide customers, is only claimable if you were with Nationwide on May 26.
The account would be fixed for 18 months at 5.5 percent, Martin added, up to a maximum of £10,000 balances.
Then, Martin added that you could keep hold of the savings interest instead of paying tax on it, if you’re careful about the time the account (or any fixed saving account) would pay out.
UK residents are given a Personal Allowance each year, an amount they can earn in savings interest before they have to pay tax on it.
Those who are basic rate taxpayers (earning less than £50,270) can earn £1,000 interest before they pay tax at 20% on anything above that, while those earning over £50,270 can earn £500 before they pay 40% on savings.
But the tax you owe is only payable when the interest is paid out.
Martin told his The Martin Lewis Podcast listeners: “Just a quick note on interest at maturity. The interest crystallises for tax purposes when you can access it. So if you’re getting a fixed account, you for example don’t want the interest this year because you’re earning more this year for example let’s say you’re retiring this year so you’d earn more next year.
“Then by fixing an account and making sure the interest is only paid next year and you can only access it next year, you can move the interest into the next tax year and then that could be beneficial to you.
“But there is no maximum number of accounts you can have, you want to put every penny where it earns the most interest.
“But you also want to manage that slightly by if you’re not on top of it, by putting it in one place where when that ends, you’d be bothered to move it when the good rate ends because the good rate always ends, is better than having a good idea to put it in five or six different accounts and then when it comes to moving it you can’t be hassled and then they all drop to a pants rate and you’re left with six pants accounts.”