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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 15th Oct 15, 5:29 PM
    • 75Posts
    • 42Thanks
    MSE Helen Saxon
    Personal Savings Allowance guide
    • #1
    • 15th Oct 15, 5:29 PM
    Personal Savings Allowance guide 15th Oct 15 at 5:29 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 17
    • Descrabled
    • By Descrabled 19th Feb 17, 5:59 PM
    • 8 Posts
    • 0 Thanks
    Descrabled
    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.
    • polymaff
    • By polymaff 19th Feb 17, 6:54 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    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.
    Originally posted by Descrabled
    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.
    Last edited by polymaff; 19-02-2017 at 6:56 PM.
    • pbolding
    • By pbolding 20th Mar 17, 11:03 AM
    • 31 Posts
    • 1 Thanks
    pbolding
    PSA query
    Can anyone advise? I have stayed just under the 40 per cent band thanks to pension contributions and charity deductions. So last year, the way HMRC puts it “your basic rate limit has been increased … to £53,000”. I have interest income of around £900. So does that mean for 2016-17 my PSA is £1000 so long as my total income including the interest is under the increased basic rate limit? Or am I missing something?
    • polymaff
    • By polymaff 20th Mar 17, 3:09 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    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
    • By Dazed and confused 21st Mar 17, 11:51 AM
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    Dazed and confused
    So to establish the amount of the allowance you work out if you are a basic, higher or additional rate payer.

    So if you have taxable salary 42750 and 350 savings interest in 2016:17 (with no other income and just the standard personal allowance of 11000) this makes you have higher rate income and you would get the PSA of 500 so your savings income is actually all taxed at 0% and only 20% tax is payable on the salary.

    So are you are a higher rate payer or not????
    • polymaff
    • By polymaff 21st Mar 17, 1:14 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    So are you are a higher rate payer or not????
    Originally posted by Dazed and confused
    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
    • By Lindagreenacre 22nd Mar 17, 10:55 AM
    • 66 Posts
    • 24 Thanks
    Lindagreenacre
    If low income
    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?
    • polymaff
    • By polymaff 22nd Mar 17, 11:20 AM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    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?
    Originally posted by Lindagreenacre
    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
    • By talexuser 22nd Mar 17, 3:50 PM
    • 2,180 Posts
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    talexuser
    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?
    • polymaff
    • By polymaff 22nd Mar 17, 4:07 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    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?
    Originally posted by talexuser
    "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?
    Last edited by polymaff; 22-03-2017 at 4:40 PM.
    • talexuser
    • By talexuser 22nd Mar 17, 5:37 PM
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    talexuser
    Good point.

    Total income 17k
    made up up 11k earnings/pension, 6k of savings interest - zero tax.

    Total income 17001
    made up of 11k earnings/pension, 6001 of savings interest - taxable income 6001 minus 5k & 1k savings allowance - £1 - £0.20 tax.

    Total income 17k
    made up of 17k earnings/pension - £1200 tax.

    *Edited to correct mistake as per below
    Last edited by talexuser; 23-03-2017 at 9:40 AM.
    • Dazed and confused
    • By Dazed and confused 22nd Mar 17, 5:48 PM
    • 1,264 Posts
    • 504 Thanks
    Dazed and confused
    Why have you omitted the savings rate band from the middle example?

    Wouldn't tax be due on £1 in that example
    • polymaff
    • By polymaff 22nd Mar 17, 7:03 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    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 ...
    Originally posted by polymaff
    Good point.

    Total income 17k
    made up up 11k earnings/pension, 6k of savings interest - zero tax.

    Total income 17001
    made up of 11k earnings/pension, 6001 of savings interest - taxable income 6001 minus 1k savings allowance - 5001 - £1000.20 tax.

    Total income 17k
    made up of 17k earnings/pension - £1200 tax
    Originally posted by talexuser
    There's no "excess" in any of your examples, so the SRA and PSA are still fully available in all three examples you give. So in the second example, only £1 is taxed.

    Try running them through my model:

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

    which I might update for 2017/18 if there's sufficient interest.
    • talexuser
    • By talexuser 22nd Mar 17, 7:12 PM
    • 2,180 Posts
    • 1,654 Thanks
    talexuser
    Hmmm... I'm having difficulty seeing at what point the 5k savings allowance becomes 1k without a spreadsheet.
    • polymaff
    • By polymaff 22nd Mar 17, 7:27 PM
    • 1,545 Posts
    • 666 Thanks
    polymaff
    There are two completely independent savings allowances, so one doesn't become the other.

    The Starting Rate Allowance sits on top of the Personal Allowance. It is £5k wide - but it will be sacrificed £ for £ if the taxable non-savings income exceeds the personal allowance.

    The Personal Savings Allowance floats on top of the above. The only way it gets sacrificed is if the top of your income "pile" crosses your entry point to higher rate taxation - when it reduces by 50% - or when you cross your entry point into additional rate taxation - when it reduces by 100%.
    • Dazed and confused
    • By Dazed and confused 22nd Mar 17, 7:29 PM
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    • 504 Thanks
    Dazed and confused
    Never.

    There is a savings rate band of £5000 taxed at 0% (in 2015:16, 2016:17 and 2017:18 I think)

    The personal savings allowance rate band is completely separate (£1000 taxed at 0% from 2016:17 for those not liable to higher rate tax).

    People earning wages or pension over £16000 (in 2016:17) generally don't get the savings rate band just the PSA band.

    People with total income (which includes some savings interest) less than £16000 benefit from the savings rate band of £5000 but will not get the PSA of £1000 (as they have no need of it)
    • elephantrosie
    • By elephantrosie 22nd Mar 17, 9:46 PM
    • 269 Posts
    • 64 Thanks
    elephantrosie
    Can anyone advise? I have stayed just under the 40 per cent band thanks to pension contributions and charity deductions. So last year, the way HMRC puts it “your basic rate limit has been increased … to £53,000”. I have interest income of around £900. So does that mean for 2016-17 my PSA is £1000 so long as my total income including the interest is under the increased basic rate limit? Or am I missing something?
    Originally posted by pbolding
    hello there. please would you teach us how to maximise your interest income to 900 quids this year?
    • elephantrosie
    • By elephantrosie 22nd Mar 17, 9:49 PM
    • 269 Posts
    • 64 Thanks
    elephantrosie
    hello guys, I am a high rate taxpayer and want to be careful not to exceed the 500 pounds yearly allowance.

    i have the following accounts (in brackets refer to annual interest income):
    HSBC regular saver 81.25
    TSB regular saver 28.38
    nationwide regular saver 161.29

    i also have a nationwide current account, but i am not sure how to calculate the interest income. if i put 2500 in it throughout the year, with 5% interest rate, what is my annual interest income from this account?

    thanks all.
    • Eco Miser
    • By Eco Miser 23rd Mar 17, 12:01 AM
    • 2,800 Posts
    • 2,591 Thanks
    Eco Miser
    hello there. please would you teach us how to maximise your interest income to 900 quids this year?
    Originally posted by elephantrosie
    £90,000 in a 1% account would do it, utilising the 3% and 5% accounts would mean less capital would be required.
    i also have a nationwide current account, but i am not sure how to calculate the interest income. if i put 2500 in it throughout the year, with 5% interest rate, what is my annual interest income from this account?
    Originally posted by elephantrosie
    Gross annual rate (4.89%) times principal(£2500) =£122.25
    Eco Miser
    Saving money for well over half a century
    • talexuser
    • By talexuser 23rd Mar 17, 9:43 AM
    • 2,180 Posts
    • 1,654 Thanks
    talexuser
    There are two completely independent savings allowances, so one doesn't become the other.
    Originally posted by polymaff
    Thanks, that's where I was going wrong.
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