Martin Lewis issues warning to people with more than £11,000 in savings account

Martin Lewis has issued some important guidance to people with more than £11,000 in their bank accounts as savings.

The money saving expert spoke about tax charges and personal allowances on his ITV show this week, explaining how to make the most of your savings and earnings.

Lewis began by explaining the personal tax allowance, which is usually £12,750.

While most people are aware of this allowance, there's a separate 'starting rate for savings' which many people aren't aware of.

Lewis explained: "The first one, the personal allowance, £12,570 a year that you can earn from any source, earnings, rent, savings, interest without paying tax on. Most people get that unless you start earning over £100,000 when it's taken away.

"The next one not that many people know about is called the starting rate for savings. This is another £5,000 of savings interest you can earn a year on top of the personal allowance. And this is designed for people who have low work earnings but high interest on savings. Often people who are retired. And here's how it works."

Lewis continued: "For every pound of earnings you earn above this allowance, you lose a pound on your starting savings rate. So imagine you earn £13,570. You're a £1,000 above that. You can now only have £4,000 of tax-free interest in your savings due to the starting savings rate. And by the time you earn from work £17,570, this is gone. So it's only for people on low work earnings and high interest on savings."

There's also the personal savings allowance which allows the basic, 20 percent rate taxpayer to earn £1,000 a year of interest in savings without paying tax.

"Now, the top savings accounts at the moment pay about 4.5 per cent. So, you need just a little over £22,000 in the top savings account before you earned £1,000 interest," said Lewis.

"High rate taxpayers pay £500 a year of interest they can make each year tax free. It's about £11,000 saved at the top rate."

After going through the four different types of savings tax allowances, Lewis went on to explain a little about cash ISAs, which he described as a savings account you don't pay tax on.

You can put up to £20,000 a year in and the interest earned in a cash ISA does not count towards the personal allowance, personal savings allowance or the starting rate for savings.