A special bank account to service wealthy customers has been launched by Kleinwort Benson that will currently allow them to circumvent the 50% tax on interest earned.
According to the head of tax services at Kleinwort Benson, Jeremy Croysdill, as reported by CityWire the account is structured to last for five years and accrue, but not credit the interest to the account.
In this way the tax point will not kick in until the interest is actually credited to the account. “There is a big difference between the accrual and credit as far as deposits are concerned” he said.
In this way the interest can be rolled up for the five years of the account during which time the 50% tax date is avoided. By then a new government may well be in power or at least the tax rates may be more favourable as the recovery should have kicked in well by then.
The account is designed to make customers’ unallocated 10%-20% cash work harder for them.
There will be Sterling, Dollar and Euro versions of this account and the minimum investment will be set at £250,000.
Croysdill calls this account a simple “plain vanilla product but it’s in the right place for clients who want flexibility for their cash.”
There is the question however of who is likely in the present economic climate to want to risk possibly tying up their cash for 5 years. Especially when government has shown its propensity to change tax rules at a whim to get at peoples’ savings.