Is HMRC a safe place for your money?
Whilst it seems a little unusual to think of depositing money with HMRC rather than with a bank, if you do have spare cash this may be something worth considering.
Just to put matters in perspective, for companies that overpay “ordinary” tax, interest is paid thereon at 2% and for tax paid early or for over-paid quarterly instalments the Revenue are paying at 2.75%, both of these are taxable.
For individuals who have overpaid tax the Revenue are paying 1.5% interest on a tax-free basis.
Interest is not accrued if you choose to pay your income or capital gains tax early.
However, for individuals, there is the possibility of using Certificates of Tax Deposit. These were very popular some years ago but fell out of favour in times of rising interest rates. Regrettably they cannot be used for corporate tax, PAYE or VAT. Essentially deposits are purchased and the rate of interest, which is taxable, varies as to whether the certificate is cashed or applied against tax payments. The current rates are as follows:-
|
Deposit of under |
Applied for tax |
Cashed |
|
£100,000 or less |
1.75% |
0.75% |
|
£100,000 or over: |
||
|
Months held |
||
|
(a) under 1 |
1.75% |
0.75% |
|
(b) 1 but less than 3 |
4.50% |
2.25% |
|
(c) 3 but less than 6 |
4.25% |
2.00% |
|
(d) 6 but less than 9 |
4.25% |
2.00% |
|
(e) 9 to 12 months |
4.00% |
2.00% |
If these rates are better than you would get from putting your money elsewhere, this may be something that is worth considering.
