Question Time: Cancel old credit cards? Martin: What 3 laws would you introduce? Pay v pensions?

0:01Martin Lewis:I wouldn't worry about the tax at the moment, I'd worry about the interest, you're not earning enough. Listeners, this isn't good enough. There's a badge going. There's freebies. This is a podcast about saving money. I literally couldn't, apart from it's about cashback, I couldn't tell you anything you've said at this point. The whole point of having a credit score is to enable you to get the right form of credit. Hello and welcome to the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. And this is our question time episode where you, our extra savvy questioners, ESQs, get to ask me your questions on absolutely anything and everything, open brackets within reason, close brackets.

0:36Martin Lewis:And this week, you ask me, we're on benefits, so do we have to pay tax on savings interest? Should I close my old credit card to boost my credit score? Should we go for higher pay, lower pension, or lower pay, higher pension? then we have a success on how giving to charity pays and to finish you asked me what three consumer laws would i pass if i got the chance i answered off the top of my head let me know what you think and let me know what you do too play the theme tune

1:27Martin Lewis:Hello and welcome to this week's episode of our Question Time podcast. Yes, it's the one where you can ask me questions on anything and everything, open brackets, within reason, close brackets. Now, for those of you waiting for Professor Sir Dr Matthew Burnham Esquire, or even for PPS podcast producer Simon, oh no, that's not happening. Today I have an existential question for you. When is a Matt not a Matt? I'm not sure I have an answer, but today we do have Matt with us, just not our usual Matt. Today's Matt is Matt Lansley, And I probably need to reveal on that a secret about the BBC. It has a mat cupboard where it keeps talented producers called Matt locked away until required.

2:15Martin Lewis:It's a little cramped space, not many perks, but some say there are so many mats because the BBC wants to walk all over them. Yet we won't have that type of talk on this podcast. We don't walk all over mats on this podcast, although he is new, so I might give it a go. So may I introduce, new to this podcast, the one and the only Question Time producer Matt Lansley. Hello, Matt. Hello, Martin. It's so good to be here. Yeah, you're right. The cupboard is a little bit cramped sometimes. Can we know about the facilities? What do they have in there? Well, I mean, obviously they have one computer to share between all the mats, but of course it's only the highest ranked mats to get to use it first.

2:51So that'd be Matt Burnham, wouldn't it? Yes, of course. The listeners can't see I actually have the number three tattooed on my forehead. so it goes Matt Burnham Matt Chorley esteemed Firefly presenter and then me if I'm good but it's a massive treat to be here thanks ever so much for having me I'm going to pretend I'm delighted to have you

3:07Martin Lewis:but now I've heard that you're third ranked I will be writing to editor Tom saying why am I down the pecking order what on earth is going on but I believe Matt Chorley still stood outside number 10 Downing Street I'm afraid I don't want Matt Chorley producing me either he'll make it all political we don't want any of that anyway Matt it is lovely to have you on board thank you so much for joining us you're going to be the curator of questions today. What do you have for me? What have you got first? Our first Esquire this week is the lovely Elaine. Elaine says, Dear Martin, we are a married couple in our 50s and our only income is ESA support group and carers allowance, which I know are taxable income.

3:41We have£115 ,000 in savings and earn£2 ,300 in interest annually. So my question is, do we have to pay tax on our savings? Thank you very much, Elaine.

3:52Martin Lewis:Thank you for your question, Elaine. But if you forgive me, I think you're asking me the wrong question. The first thing I hear in your question is, we have£115 ,000 of savings and earn£2 ,300 in interest annually. That's just not enough interest. There are lots of savings accounts paying you over 4%, some at 4.5%. That question should be, we have£115 ,000 in savings and earn nearly£5 ,000 a year in interest annually. So the most important start point is that you should be in savings accounts that pay more. I'm going to talk more about that in a moment but let me answer your core question first because it does impact the strategy whether you pay tax on the savings or not.

4:29Martin Lewis:Now you get employment and support allowance which isn't a means-tested benefit although there are certain means-tested elements of it. You also get carer's allowance. My guess is your total income from that is somewhere in the region of£200,£220,£230. I'm going to put it around that level which means annually you're earning somewhere around£12 ,000 a year. Now everyone is allowed to earn£12 ,570 a year from all earnings including savings interest. So just on your ESA and carer's allowance alone I suspect you're earning below the taxable amount. But for people who have low earned income there is a special savings allowance.

5:09Martin Lewis:It's called the starting rate of savings and what that says is you can earn an extra£5 ,000 from savings interest alone if you are a low earner. So here's how it works. You've got up to£12 ,570. Now for every pound of earned income you have above that, you lose a pound of that£5 ,000 allowance. It's really complicated to do in audio, but let me try. Imagine you had earned income of£13 ,570. That puts you£1 ,000 above the£12 ,570 allowance, which means your starting savings rate, the extra amount from the starting savings rate you can earn from interest on your savings tax-free is£4 ,000. If you earned£1 ,000 more from earned income, it would drop to £3 ,000.

5:53Martin Lewis:Plus remember, as a basic rate taxpayer, you get£1 ,000 of personal savings allowance that you can earn from interest tax-free. So all in all, in your circumstances, I think depending exactly what your earned income is, you could probably have earned income plus savings interest totaling up to around£18 ,000 and not pay any tax on it. And from what you've told me, you're not close to that. And even if I boost your interest to£5 ,000, I still don't think you would be close to it. And you could always put some in a cash ISA where the interest is tax-free anyway. So on to what I think is probably the more important part.

6:27Martin Lewis:What do you do? Unless your savings accounts are currently fixed, you're free to take money out and put them in a new savings account. So I'd probably be putting some into a cash ISA just as rates are high. top paying cash isa at the moment is trading 212 it's got a promo rate at the time of me recording this at 4.62 but that does vary it's a cash isa so you could put 20 000 pounds in each so you could have 40 000 pounds that is never taxable after that for large amounts of money easy access you've got something like chase which pays 4.5 for new customers assuming you're not a customer there already now the key thing with chase is you have to open its bank account to get it but its bank account you can just open without switching to and it doesn't do a hard credit check and you work it via an app and it pays you 4.5 % interest.

7:12Martin Lewis:After a year the rate will drop and you'll want to switch elsewhere but you'll get the 4.5 % and the rate it drops to is still better than what you're earning at the moment to be honest. You've also, if you could lock money away for a guaranteed rate, there's a nice offer at the moment from Marcus which is part of Goldman Sachs. It's another app-based bank. You simply go to Marcus and you can get a one-year fixed savings account at 4.6%. That's only a smidge below the best buys. But uniquely, as a non-cash-ISA fixed-rate savings account, it allows you to close the account early if you needed to withdraw money.

7:42Martin Lewis:You would pay an interest penalty, 90 days worth of interest for doing that. So it isn't something you should be putting money in if you think you're going to need the money. But it's a great way to lock many away, get a guaranteed rate with the option if you really needed it of taking money out. And there are just loads more accounts over 4 % if you don't like the app-based accounts. There are good information sources online. So my most important thing for you is I wouldn't worry about the tax at the moment. I'd worry about the interest. You're not earning enough. Elaine, I hope that helps you.

8:08Martin Lewis:I suspect life is quite difficult because I know that earning and support allowance is a benefit for people who have a disability or health condition that limits your ability to work. So it's really important that you make those savings work as best as they possibly can for you.

8:25Martin Lewis:so we're going to question two now now matt the other matt's format is at this point we have a caller are you following other matt's format are you being your own matt he's already left me several very threatening voicemails actually for not following his format quite strictly so i apologize to other matt for that uh this week people were just very busy i'm afraid uh a little bit reticent to get in touch were you offering them the badge did they know about the esq did you know about the ESQ badge that they would get if they call in on the show. I'd heard legend and tell of the ESQ badge. No one bit this week, I'm afraid.

8:55Listeners! Listeners, this isn't good enough. There's a badge going.

8:58Martin Lewis:There's freebies. This is a podcast about saving money. There was a freebie available and some of you didn't take it. Hang your heads in shame, people! Hang your heads in shame. As for you, Matt, I think we need a voice or something. I think you have to put on a different voice and we can pretend it's a caller. Well, that is quite a challenge to lay at my doorstep I can just hear you going, oh, please don't do this to me. I'm doing it though, Matt. I'm sorry. That's the nature of question time. We put people under pressure. We make them feel a little bit awkward. Not our callers. We make you feel nice.

9:28Martin Lewis:But this is about the producers. So, producer Matt, what voice are you using? Well, I can do a half decent Australian. Let's do it. That wasn't it then, but I could do it. Is this a long or short question? It's a fairly long question, but I will give it a go. Give it a go. We'll get to a few sentences through. If it's a nightmare, I'll let you off. Otherwise, we'll keep going. How about that? Challenge accepted. Okay. Let's do this. We're just going for this. I will. Don't you worry. Am I being mean? I'm not being mean. No, no, no. I'm going to look very capable at the end of this. Don't you worry.

10:02Okay, go for it. So this question comes in from Alison, just to get that out of the way before this descends into madness. Dear Rosie, Matt and Matt. And they addressed it to Matt.

10:13Martin Lewis:It was another Matt, but we'll keep going. I like it. Go on. Yes, and there's a night from Rosie saying this. correct way to address emails so we'll bear that in mind going forwards. It's very good. I'm looking for some advice regarding cashback reward credit cards and how changing them affects your credit score. I'm going to throw in a mate there. I currently have a cashback credit card that I've held for at least five years. In the first year it offered a very good cashback percentage but over time... I'm going to have to stop you because just every time you said cashback. Kishbik? Try something vanilla air freshener in an Australian accent Completely, I literally could Apart from it's about cashback I couldn't tell you anything you've said at this point I've just completely lost focus Kishbik, oh no Would you like me to get to that?

11:01I don't know what I want I think I need to do my job I think you need to go back and read it in your normal voice Because I've lost it I'm very sorry that my accent was so good That it literally disrupted Kishbik Kishbik, yes. Let's go over to my disc.

11:16Martin Lewis:Doesn't know Rosie is also in hysterics. For regular listeners, you'll know, Rosie is the guardian of all of the facts. She's here but never heard, and Rosie's also tears in her eyes, a bit like me. OK, Matt, why don't we start again? Understood. And would you like my traditional non-specific English tones? OK, Kishbik. Right, now, sup. Dear Rosie, Matt and Martin. Good. I'm looking for some advice regarding cashback reward credit cards and how changing them affects your credit score. Got it. I currently have a cashback credit card that I've held for at least five years. In the first year, it offered a very good cashback percentage, but over time, the rewards have dropped to almost nothing.

11:54Because of that, I'm considering opening a new cashback card elsewhere to take advantage of better introductory offers. However, I've heard that closing old credit card accounts can negatively affect your credit score and your history with lenders. I'm also concerned that opening a new cashback card every year and then closing old ones might make me look risky to lenders, even though I always pay my balance off in full every month and never carry debt. What would generally be the best approach in this situation? And then they've given you sort of a multiple choice. OK, I like that. It's like a mastermind.

12:23Is it better to keep the old card open and apply for a new one, close the old card after opening a new one, or avoid switching cards too often? I'd really appreciate any guidance on how to balance getting better cashback rewards while still maintaining a strong credit profile. Many thanks, Alison.

12:39Martin Lewis:Thank you so much for your question, Alison. As I always say, credit scoring is more art than science. So there is no hard answer behind this. And in a way, I would mainly say I wouldn't get too hung up about it. This isn't going to have, in the long run, a huge effect. There might be a short-term dip in the credit score your credit reference agencies give you. Remember, they are just a loose indication of how that credit reference sees you as a typical customer. but each firm scores you when you actually apply scores you differently based on its own wish list of what it wants and this one is really interesting because there are lots of different factors at play here firms tend to like evidence of longevity so when you're closing and when you're switching that is minorly negative but then when they assess you two of the big factors that they look at when they're credit scoring is your debt ratio your unsecured debt percentage of annual income, well that's unaffected by you having these credit cards.

13:40Martin Lewis:It doesn't change. You're not talking about borrowing more, you're just talking about using a different credit card for doing so. But more interestingly is your credit utilisation, which is the percentage of available credit used. Now you could argue that by keeping an extra card open and increasing the amount of credit you use if you're not spending any more, your debt as a proportion of the credit that you have is actually reduced. So there is an argument that having more credit would benefit you. But credit utilisation only tends to really be an issue if you've got a high debt ratio, if you've got using a high proportion of your annual income as on secure debt, which by the sound of it, if you're talking cash back credit cards, doesn't really matter.

14:17Martin Lewis:My main reason for keeping a card open would be if they ever gave you existing customer card offers. If not, my preferred way of doing this, if you don't need the credit, I would keep it tidy and get rid of old unused credit cards. While you may take a short-term credit hit, it's only going to be minor, don't do it just before you're about to make a big application. Like if you're about to get a mortgage, you're about to do some... In fact, it's probably even important I go there. I'm just going to change tax slightly before I finish that. I tend to think of your credit score. Again, it doesn't actually exist as a concept, but building up your credit worth enough as you like.

14:52Martin Lewis:A bit like savings. You're saving it up for when you need it. And what I always find quite amusing, not in a funny way, but in sort of, it's a strange way of thinking, is people get so worried about lowering their credit score that they don't do anything. Well, the whole point of having a credit score is to enable you to get the right form of credit. It's to enable you to get a cheaper mortgage. It's to enable you to get a cheaper balance transfer. It's to enable you to get a good and high paying cash back credit card. So the idea that you would not get a good and high paying cash back credit card to protect your credit score is a false logic.

15:28Martin Lewis:You protect your credit score so you can get a good high paying cash back credit card. Now, there is a hierarchy of usage here. Mortgage most important, clearing off expensive debt second most important. But by the sound of that, not many of those other things apply. So what you really want to do is do what's right for you first. You've got that credit score. Utilise it on the thing that will give you the most improvement, which is in this case, unless there's elements you haven't told me, which would change circumstances, in this case is getting your cash back credit card. As for closing the old card, I would probably do it.

16:00Martin Lewis:If you're doing this once a year, it might have a short-term hit on the score that you see, but it shouldn't really be a case that is going to last a long time and give you a real detriment in a way that would stop you getting any big, important products. Just be careful you're not doing lots of different transactions, lots of different applications in too short a space of time. People worry way too much about small moves in their credit scores from the credit reference agencies. So many people get in touch with me and say, it's dropped three or four points. and it's like, who cares? Three or four points is nothing.

16:27Martin Lewis:If it drops 200, something systemic's going wrong. If it drops three or four, it's likely just how that particular credit reference agency is scoring based on something very, very minor. Don't sweat the small moves. So I think you're fine to go and get your Kishbeck card whenever you want. Oh, no. I've got threatening voicemails from producer Matt. I'm now banned from the entire nation of Australia. Yeah, that's fine. I don't think producer... Well, actually, Professor Sir Dr Matthew Burnham-Ausquai he is the type of person who would think he has the power to ban you from Australia. I could hear him saying that.

16:58I could hear him doing it. Oh, no. OK, right. I'm moving on and muting my emails.

17:05Martin Lewis:OK, so I think we'll all call us. Do we even have later, do we have a voicemail, perhaps? Yes, we do. We have a voice note standing by. OK, so good. So we're going to hear someone's voice other than me, producer Matt, an Australian producer Matt, at some point in this podcast. That's good to hear. What's your next question for me, Matt? Well, we're going to do something a bit different now. We're going to go to one of our success stories that we get sent sometimes. Always great to hear. This one's from Sarah in Scotland. I'm not going to do an accent, don't worry. I'm slightly disappointed. I'm just looking at Rosie.

17:35Martin Lewis:Rosie, do I try and push Matt to do a Scottish accent or do I leave it? Rosie's giving me a slightly askance look. She thinks we might offend some of our Scottish listeners and therefore I think I've been told we can't do it. My Scottish accent's far worse than my Australian. That should tell you everything you need to know. Okay, that's fine. So here's our success story then sent to us by Sarah in Scotland. Hi, Martin. I've been a higher rate taxpayer for a couple of years now and give regularly to a number of charities using gift aid. Following your advice, I wrote a letter to HMRC. I was over the amount of giving which can be claimed online and asked for my tax code to be changed, listing all my gift-aided giving.

18:10They have now changed my tax code and have sent me a£1 ,790 rebate. It is especially useful living in Scotland as you become a higher rate taxpayer at a much lower income threshold. Thanks so much, Sarah in Scotland.

18:22Martin Lewis:Absolutely a pleasure, Sarah, and thank you so much to giving to whatever charities you chose to give to. So people will know, Gift Aid, if you're a UK taxpayer, you are allowed to tick the Gift Aid box when you donate to a charity and the charity automatically gets the 20 % tax that you paid back. Now, because of reciprocals, so if you donate£80, it gets£20 and£20 on 80 is 25%, so the charity gets 25 % on top, which is a needlessly complicated explanation I've just given you. So ignore that if you didn't get it. But the point is, if you're a higher rate taxpayer or top rate taxpayer or in one of the different bands that are in Scotland, you are entitled to get back any excess tax you paid above the 20%.

19:05Martin Lewis:So if we take the very simple example of somebody in England who is a higher 40 % rate taxpayer, if you get paid£100, you take home 60, we'll ignore national insurance, The charity can claim£20. So that puts you up to£80. There's another£20 there. And if you fill in your gift aid in your self-assessment tax return, or you get in touch with HMRC if you're not doing a self-assessment tax return, you can claim that extra tax back. Now, of course, you could also then donate some of that to a charity too and claim extra gift aid back on the top of it if it all fits. But yes, we've done this before.

19:40Martin Lewis:Talked about it in the pod before. It's amazing how many people who are higher rate taxpayers who don't realise that when they do gift aid there's a little bit of extra money that's yours and you could even just make a bigger donation to charity knowing it's coming back to you and you should claim it thank you so much sarah for getting in touch that's really appreciated now we're going into our last question of the day i presume is this the voice note or is that the funny uh the voice note is the funny the voice is awaiting you in the very near future all right matt we're not going to do any accents We're just going to keep this totally straight.

20:14Martin Lewis:Let's get into it. So this one comes in from Paul. Hi, Martin, and the presenter, brackets, Matt. I mean, Paul, it's all very well to butter up Matt Burnham. Matt here, of course, is not jumping above his station, but Matt Burnham certainly is with that. It's fine to butter him up, but you still want me to answer your question. I think you need to be a little bit more careful. I mean, I could say, scrap this question, let's go to a new one. If I said that, Matt, would you allow it? Absolutely not. We've got Paul's question in front of us. We need to get him his answers, Martin. Spoil, spoil. Carry on, then.