low income and tax on savings

maggieann155 · 2 September 2010 at 3:06PM

hi

could someone please clarify (or not) that there is a 10% tax band for savings interest, up to £2440,this after having used up your personal allowance, if that is your only income.

eg income £6450 therefore no tax to pay but have savings interest of £2440, this being taxed at 10% and anything over that at 20%, unless of course its in an isa ?

many thanks in advance

CLAPTON · 2 September 2010 at 3:28PM

indeed so, although the tax free allowance is 6475

zygurat789 · 2 September 2010 at 3:37PM

Any taxable income over £6475+£2440 interest is taxed at 20% and reduces the 2440 10% band pound for pound.
ie
Income £6480, interest £2440. Total £8920 - PA £6475
Taxable £2445 £2435 @ 10% = £243.50 and £10 @ 20% = £2 Total liability £245.50
Tax already paid on interest £488, refund £242.50

maggieann155 · 2 September 2010 at 5:00PM

thanks both for quick reply.

CLAPTON - thanks for putting me straight on the personal allowance - im £25 a year better off already.lol

and zgurat , your examples have sorted it out for me great.

we re going to be a bit better off in retirement.
its all good!

low income and tax on savings

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