Personal Savings Allowance guide
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But you do have to have very particular types and amounts of income to benefit from the full £17500, plenty will have over £1000 tax to pay on this as I guess having £6000 interest a year is the exception rather than the norm!!0
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Yes absolutely. Income tax still needs to be paid on non savings income if over the £11,500 personal allowance. I didn't make that clear but it is explained clearly on that page I linked to.Dazed_and_confused wrote: »But you do have to have very particular types and amounts of income to benefit from the full £17500, plenty will have over £1000 tax to pay on this as I guess having £6000 interest a year is the exception rather than the norm!!0 -
Your understanding may be incorrect. You can earn £11000 and receive £6000 in interest without paying income tax, but if you earned £12000 and received £5000 interest you would have to pay £200 tax.Dancinglady wrote: »Yes but there is a different rule for people on low incomes , my understanding is that in 16/17 you could earn up to £17000 in income and savings interest before paying tax
Also you can receive an unlimited income from ISAs without paying income tax on it, so beneficiaries of the starting rate on savings may not actually be on a low income.Eco Miser
Saving money for well over half a century0 -
Dancinglady wrote: »Yes but there is a different rule for people on low incomes , my understanding is that in 16/17 you could earn up to £1700[0] in income and savings interest before paying tax , my question is does this rise to £17500 in line with the increase of the starting point for paying tax which goes from £1100[0]-£11500. I understand that the other allowances are as above ,but it is different if you are on a low income , it is the low income threshold/allowance I am referring too
Many Thanks for any assistance
And Coldiron gave you the correct answer - as has D&C in correcting your (and many, many others - not least HMRC's) misconception about "£17,000 before you pay tax".
You might like to take a look at this many-thanked post. It was written before the start of 2016/17 and has remained correct even as others, including HMRC have twisted and turned with their deceptive interpretations of the legislation. It will also only need some tweaking of the "lines drawn across" to be fit for 2017/18.
http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9
EDIT : On a quick assessment, all that needs to be altered to make that post suitable for 2017/18 is that the references to lines drawn across at £11,000, £16,000 and £43,000 need to be changed to £11,500, £16,500 and £43,500 respectively.0 -
Here's a simple, visual, model of 2016/17.
The first £5,000 of dividend income above the £11,000 line is taxed at 0%.
What is left is taxable - below the £43,000 line at basic rate, above at higher rate.
But this is for Earned income, surely.
Dividend income is at different rates, yes??0 -
Dividends are a whole different conundrum and can make life oh so complicated!
From gov.uk,
Example 6
“I have a non-dividend income of £40,000, and receive dividends of £9,000 outside of an ISA”
Of the £40,000 non-dividend income, £11,000 is covered by the Personal Allowance, leaving £29,000 to be taxed at basic rate.
This leaves £3,000 of income that can be earned within the basic rate limit before the higher rate threshold is crossed. The Dividend Allowance covers this £3,000 first, leaving £2,000 of Allowance to use in the higher rate band. All of this £5,000 dividend income is therefore covered by the Allowance and is not subject to tax.
The remaining £4,000 of dividends are all taxed at higher rate (32.5%).0 -
Polymaff:..... "What is left is taxable - below the £43,000 line at basic rate, above at higher rate."But this is for Earned income, surely.
Dividend income is at different rates, yes??
Irrelevant, because I was very careful to use the terms "basic rate" and "higher rate".
A LOT of thinking went into producing that model0 -
Dazed_and_confused wrote: »Dividends are a whole different conundrum and can make life oh so complicated!
From gov.uk,
Example 6
“I have a non-dividend income of £40,000, and receive dividends of £9,000 outside of an ISA”
Of the £40,000 non-dividend income, £11,000 is covered by the Personal Allowance, leaving £29,000 to be taxed at basic rate.
This leaves £3,000 of income that can be earned within the basic rate limit before the higher rate threshold is crossed. The Dividend Allowance covers this £3,000 first, leaving £2,000 of Allowance to use in the higher rate band. All of this £5,000 dividend income is therefore covered by the Allowance and is not subject to tax.
The remaining £4,000 of dividends are all taxed at higher rate (32.5%).
Well, my model covers this case correctly and, I hope, understandably - without the need for more than basic arithmetic and, hopefully, leaving the reader with some feeling of confidence that they understand the underlying process a little better.
This is the main failing of HMRC. The bulk of HMRC have no feel for the underlying process. Within HMRC there are, undoubtedly, one or two individuals who have been core to the design of 2016/17 - but from there outward it is a case of hopeless mis-interpretation.
As evidence by all of the rubbish on GOV.UK during the last year or so.
And this is supposed to be the Era of Tax Simplification
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Query to polymaff:
Having taken advantage of the new marriage allowance does this mean that the basic allowance for 2016/17 becomes £9900 and the savings allowance of up to £5000 results in a 0% up to £14900. If this is correct then the figures for next year can similarly be calculated.
I might add convincing HMRC is not easy.0
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