Letter: Sitting pretty with lower inflation
Sir: Stella Pates (letter, 20 June) has been duped by inflation. The income she receives from her savings comes in two parts: that which merely restores her capital to its real worth, and the surplus. If she was spending more than her surplus previously, then she was living off her capital, however unwittingly.
Since she now needs less income to preserve her capital, she is in fact better off: because the proportion of the value of her savings on which she is liable for tax is considerably lower.
Yours faithfully,
EMMA STREETS
London, N6
20 June
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