Martin Lewis issues ‘don’t do it’ warning to savers amid tax fears | Personal Finance | Finance
Martin Lewis has issued a warning to savers amid growing tax concerns. The financial guru explained why keeping cash at home is not the best decision for savers.
Mr Lewis was asked by a listener of his BBC Podcast whether he advises them to hide extra cash “under my mattress” rather than put it in a savings account. The concerned listener said: “I fear that it will be taken or taxed if I do anything else. Do you think I’m being too cynical?”
As reported by Chronicle Live, the Money Saving Expert highlighted a number of important things to consider in his response. He clarified the issue and urged the listener to balance their understandable cynicism with practicality.
Assuming the listener was referring to existing funds, Mr Lewis said: “Your savings are not taxed; it is the interest you earn, the extra money that savings generate, that is taxed.
“You’re not going to lose money from tax on savings, you will just lose some of the interest. The same is true if you invest in, it’s the capital gains tax, the amount that you pay on the profits, you might also pay income tax on the dividends as well, but it’s on what you make, it’s not on the amount that you have.”
Unlike keeping savings at home, Mr Lewis explained how putting money into a savings account is protected by the Financial Services Compensation Scheme (FSCS). This means your money is safeguarded up to £120,000 in the event that your bank fails.
The expert continued: “If you keep money under your mattress, and somebody breaks in and steals the money, even the best home insurance policy normally only covers you for up to £1,000 worth of cash, and also you’re having to pay for the insurance policy for up to £1,000 worth of cash.
“Whereas money in a bank or financial institution that is paying interest, you are being paid effectively to put your money there, and you get the protection on top.”
Mr Lewis finished by emphasising: “So if we’re just talking really sensibly on a like-for-like comparison, between keeping money under your mattress and putting it in a savings account, it is an absolute no-brainer. Put it in a savings account.”
