Personal Savings Allowance guide

Descrabled wrote: »

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.

Your figures are correct, and the same process will apply in 17/18 (unless something changes - remember, it is all speculation until the Finance Act is passed!), but let's stick to conventional terminology!

A successful election for the Marriage Allowance Transfer will result in your PERSONAL ALLOWANCE reducing by 10%. I didn't include MAT in the visual model I published last April, but if you want to use use the model in either its 16/17, or 17/18, versions, just lower the three lines drawn across the column by that amount.

p.s. Note that NOTHING about the visual model changes as the result of being the Recipient of an MAT.

The legislation states:

(1)Subsections (2) to (4) determine the amount of an individual's savings allowance for a tax year.

(2)If any of the individual's income for the year is additional-rate income, the individual's savings allowance for the year is nil.

(3)If—

(a)any of the individual's income for the year is higher-rate income, and

(b)none of the individual's income for the year is additional-rate income,

the individual's savings allowance for the year is £500.

(4)If none of the individual's income for the year is higher-rate income, the individual's savings allowance for the year is £1,000.

Dazed_and_confused wrote: »

So are you are a higher rate payer or not????

From the legislation:

each of the following is “higher-rate income”—

(i)income on which income tax is charged at the higher rate or dividend upper rate,

(ii)income on which income tax would be charged at the higher rate but for section 12A (income charged at savings nil rate),

(iii)income on which income tax would be charged at the dividend upper rate but for section 13A (income charged at dividend nil rate), and

(iv)income of an individual who is a Scottish taxpayer or Welsh taxpayer which would, if the individual were not a Scottish taxpayer or Welsh taxpayer (as the case may be), be income on which income tax is charged at the higher rate.”

Which I take to mean that higher-rate income is your adjusted nett income minus your basic rate limit.

Lindagreenacre wrote: »

I am retired, with low income (pension) and sometimes pay no or only a few pounds income tax per year, yet I receive savings interest in excess of the £1,000 limit. What happens there?

Depends upon your actual income. Like to provide some details of what and how much?

Alternatively, DIY at:

http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9

talexuser wrote: »

Would it be right to say if total income is below 17k this tax year there is no tax to pay on savings income even if it is above 1k? However if earned income or pensions are above the 11k allowance then 20% is deducted for that portion for the low income query?

"The first £17k tax-free" slogan from HMRC et al is only true when the taxable non-savings income is less than or equal to the Personal Allowance.

So, at the extremes, you could have £17k of taxable savings income and not pay a penny in tax - providing that you have no taxable non-savings income - or £16k of taxable non-savings income with £5k of it taxed, and no more than £1k of taxable savings income at 0%

The key point, as you say, is that once taxable non-savings income exceeds the personal allowance:

a) that excess is taxable, but notice also that,
b) you lose the excess from your starting rate allowance

- making, for some, the effective tax rate on the first £5k of excess taxable non-savings income getting on for 40%. How fair is that?