Tax on interest (or not)

superloopy_2

Hi - a simple question which i'm sure someone knowledgeable person can answer pretty quickly. I am due to take early retirement and will receive a works pension. This will be taxable if it exceeds my personal allowance, yes? The question is ... given that I am not working am I classed as 'taxable' when it comes to interest on savings or not? Just a simple question which has been bugging me for a couple of days ...

JimmyTheWig

You are classed as "taxable" if you earn over the threshold. So if your pension income plus your interest on savings is more than your personal allowance then you will be taxed. If not, you won't be.
The fact that you are not working doesn't really come in to it.

johnat11

My understanding is that once your 'income' exceeds your tax allowance amount you should expect to pay tax at the appropriate rate. It doesn't matter whether the income is from a salary, wages, pension or is interest on savings or investments (unless they were put in a tax-free TESSA or ISA) it counts in the same way.

Baldur

As Jimmy the Wig says, working or not is irrelevant - see tax rates & allowances on the HMRC website - http://www.hmrc.gov.uk/rates/it.htm

CLAPTON

Tax is based on your income whether from employment, pension, interest, dividends etc and applied equally to everyone from newborn to 65 (over 65 there are additional allownances).

In your case, if the sum of your pension and the grossed up interest (excluding ISAs and other non taxables) exceeds 6035 then you are liable to tax just as if you were working.

NI is different however as you don't pay that on pensions or savings.

Pandora123_2

You may be entitled to a special 10% tax on some of your savings income, but it depends on how much your pension is. (And as others have pointed out, it would be the same whether you had employment earnings or pension income.)

More details here.

superloopy_2

Thanks to everyone who replied .... noted (even though it's not good news)

Just_landed

The way to go is put money into CASH Isa's. See the Isa forum. We pay enough TAX & it will only get WORSE. :eek: