BBC expert £1,000 warning to savers after Bank of England decision
By Google News Category Money News ·
A warning has been issued for anyone with savings in bank or building society accounts after the Bank of England hiked interest rates last week. The Bank of England increased interest rates for the first time in more than three years as it warned that inflation is set to soar to around 5%.
Policymakers at the central bank said they were increasing borrowing costs in a bid to combat the rising cost-of-living for British households and businesses. The Bank’s Governor Andrew Bailey also warned that further hikes are likely if the Iran war is not resolved.
Radio 4’s Moneybox program was told that while it might seem like good news for savers - it can also tip them into paying tax - and in the Budget last month Chancellor John Healey hiked on savings interest tax rates.
Rachel Springall from the financial data firm Money Factors , speaking of how the Bank of England committee was unanimous to raise told Radio 4 listeners: “It’s a huge impact and gives us more of an indication of where rates might go.
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“I’ve had a look through a lot of the columnists’ opinions on this one and they are expecting another rate rise unfortunately probably by the spring and there are some murmurings about another one later in the summer.
“So it’s not over yet. But as the Bank of England estimated, because of the uncertainty over the war, that’s the path, and the worry about prolonging inflation, and if we prolong inflation, we could get more interest rate hikes.”
Presenter Paul Lewis said the committee also suggested it expects the inflation rate to rise to 5% which has an impact on savers. Ms Springall said: “Next year there’s a lot going on for savers. We’re getting an increase in savings tax by around 4% across the board. So having higher interest rates can feellike a good thing because you’re getting more return.
“But higher inflation means your money doesn’t go as far and potentially breaching your thresholds for your personal savings allowance. And when you do that you get taxed so this is why cash ISAs and sotcks and shares ISAs because you can protect your money from that.”
Mr Lewis asked what the best savings rates are currently. Ms Springall said: “So if you’re looking for a variable rate you’re looking at about 5%. A lot of those deals have bonuses so you’re not going to get 5% for a whole year potentially. If you’re looking at fixed you do want over 5% for the top fixed rates but if you’re looking at a branch-based account then potwentially look at building societies.
They’re offering some of the best branch-based rates at the moment.”
During his speech, Mr Healey spoke of a ‘further 2%’ for savers - and BBC Radio 4’s Moneybox programme revealed that this came on top of an increase already outlined by his predecessor Rachel Reeves.
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Basic rate taxpayers (20%) are allowed to earn up to £1,000 in savings interest tax-free annually, higher rate taxpayers (40%) can earn up to £500 in savings interest tax-free each year, while additional rate taxpayers face tax on…
Originally published by Google News Category Money News
