17:23 12 March 2013
In the UK, there are three types of savings and investment income that you will normally pay taxes on. These are the following:
•Income from savings. The interest that you earn from your savings account is subjected to tax. This type of interest can also come from bank or building society accounts, national savings and investment products, gilts, corporate bonds, permanent interest-bearing shares, local authority investments, and unit trusts or open-ended investment companies.
The annuity that you buy voluntarily also falls into this category. This is different from the one that you buy using the proceeds of your pension fund. However, a part of the income from your voluntary annuity is tax-free. That means that only part of your gains is going to be taxed.
•Income from dividends. Dividend income comes from shares you own in companies, investment trusts, and unit trusts.
•Income from life insurance investments. This is an income you usually receive from life insurance investments such as investment bonds.
How much tax?
Tax on investment in the UK is progressive. This means that it is not fixed. The more you earn, the more tax you’ll have to pay.
The tax that you will need to pay will depend on the type of investments and savings that you have and how much you receive. Tax on savings income is paid at 10per cent, 20per cent, 40per cent, or 50per cent. The tax is often deducted before you receive your income.
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