Answers to the sample questions
1. A basic-rate taxpayer (20% tax on income) can earn £1,000 interest on savings per tax year without paying tax on it. Higher-rate taxpayers (who move into the 40% tax bracket) can earn £500 interest on their savings before being taxed. Additional-rate taxpayers (whose income extends into the 45% tax bracket) get no allowance.
2. Pay as you earn. This is the way most employees pay tax – it is deducted by the employer – so the amount of money received comes after tax is taken off.
3. Standing order: You are in control. You instruct your bank to pay the money to a particular person or company, and it is your responsibility to change the payment details (eg, the date or amount) if they need to be changed.
Direct debit: An instruction to your bank to release money from your account to pay bills and other amounts automatically. The billing company has control.
4. The official UK interest rate (often called the base rate) is reviewed and set eight times a year by the Bank of England. Many lenders, especially with mortgages, tend to move their rates in line with this rate – so when it rises, so do they. Some rates are directly linked to it, but at other times the lender can choose whether and how much it tends to match it depending on its own competitive advantage. Yet some rates, such as fixed-rate mortgages or high-interest credit cards, may not move at all.
5. Phishing is a criminal activity which attempts to mislead people into providing personal information and often bank account details. This is often done online through the sending of fake emails or pop-up messages.