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Tax advice please
Comments
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Excellent Jem, I think I've got it. To reinforce it I thought I'd present the following scenario:Yes he would. If his pension was £5300 and his savings interst was £1m he would still be entitled to the 10% band.
Earned income comes from a job or a pension.
Savings income is interest from savings and is not earned income.
Pension £5,300 gross (no tax deducted at source)
Savings interest £17,000 gross
Tax paid on savings £3,400
Rebate due on residue of personal allowance (£735 x 20%) = £147
Rebate due on overpayment of savings tax of £2320 x 10% = £232
Total rebate due of £3790 -
Tell me, if his pension was £5300 and his interest on his savings was say £17k before tax, how would that stack up and would he still be entitled to take advantage of the 10% savings rate?
As Jem says ..... yes.
Most of us are denied access to the Savings 10% rate because our earned income is too high. So .... if his current pension was £5300 but he was getting State Pension (say £5000) on top of that ...... then he would not have access to the 10% rate.
As his earned income (now £10300) is in excess of the band created by PA + £2320 (£8355). His earned income must be below £8355 in order to access the 10% rate at all.If you want to test the depth of the water .........don't use both feet !0 -
Excellent Jem, I think I've got it. To reinforce it I thought I'd present the following scenario:
Pension £5,300 gross (no tax deducted at source)
Savings interest £17,000 gross
Tax paid on savings £3,400
Rebate due on residue of personal allowance (£735 x 20%) = £147
Rebate due on overpayment of savings tax of £2320 x 10% = £232
Total rebate due of £379
That works for me ..... and your relative.
I'll tell Jem to put the cork back in the whisky! But only temporarily .... as we'll set you a test with different figures next week!
More seriously. Bear in mind his PA goes up to £6475 this year and the 10% band up to £2440. So if his income remains relatively constant (the pension in particular .... as it is that which erodes the new threshold of £8915 below which the refund will be due) .... there will be a greater refund due at the end of 09-10.If you want to test the depth of the water .........don't use both feet !0 -
Ah yes I see what you mean. Of coure he does not get a State Pension, just the occupational one, so ok there I guess.As Jem says ..... yes.
Most of us are denied access to the Savings 10% rate because our earned income is too high. So .... if his current pension was £5300 but he was getting State Pension (say £5000) on top of that ...... then he would not have access to the 10% rate.
As his earned income (now £10300) is in excess of the band created by PA + £2320 (£8355). His earned income must be below £8355 in order to access the 10% rate at all.0 -
Oh no I couldn't cope with another tax task!That works for me ..... and your relative.
I'll tell Jem to put the cork back in the whisky! But only temporarily .... as we'll set you a test with different figures next week!
More seriously. Bear in mind his PA goes up to £6475 this year and the 10% band up to £2440. So if his income remains relatively constant (the pension in particular .... as it is that which erodes the new threshold of £8915 below which the refund will be due) .... there will be a greater refund due at the end of 09-10.
Yes I understand what you said about this years allowances and it will be advantageous to him because there is a ceiling on his pension, ie increases limited to not more than 2.5%. This year his savings will produce a lot less income because of generally poor interest rates.
In 2007 - 2008 his pension was much less, ie £3545 because he only started claiming it part way through the year and he had no other income other than his savings interest. So I'm realising he will be able to reclaim a nice little sum. His interest on his savings was about the same. So I've reckoned that it might shape up thus:
PA £5225 - earnings £3545 = £1680 x 20 = £336 rebate
10% rate on the first £2230 of savings interest = £223 rebate
Total rebate for 2007-2008 = £5590 -
So I've reckoned that it might shape up thus:
PA £5225 - earnings £3545 = £1680 x 20 = £336 rebate
10% rate on the first £2230 of savings interest = £223 rebate
Total rebate for 2007-2008 = £559
On behalf of Jem as well ..... that looks spot on. Well done
(But I'll glance over it tomorrow! Signing off as I'm tired. Got a blackbird that thinks it's a nightingale waking me up at 0330hrs every morning. I love blackbirds ... but I wish he'd take his morning chorus and his out of synch body clock elsewhere. He's been at it for 4 weeks now .... noisy little s*d)If you want to test the depth of the water .........don't use both feet !0 -
Thanks Mike & JemOn behalf of Jem as well ..... that looks spot on. Well done
(But I'll glance over it tomorrow! Signing off as I'm tired. Got a blackbird that thinks it's a nightingale waking me up at 0330hrs every morning. I love blackbirds ... but I wish he'd take his morning chorus and his out of synch body clock elsewhere. He's been at it for 4 weeks now .... noisy little s*d)
Mikeyorks - Bradford? A nightingale sang in Forster Square?0 -
Yes you're right, it wasn't a maths problem. Also, I understood the difference between earned/pension and savings income too. What I couldn't grasp was the way in which the 10% band may or may not be applied. Reading about it on the net in various places, I was believing that the 10% rate couldn't be applied in uncle's case because his savings interest was in excess of PA+£2320. I understand now, with yours and Mikeyorks help, that it's his earned/pension income that must not exceed PA+£2320 in order for him to have the 10% rate applied to his savings income.It doesn't look as if it has been a Maths problem you had - more an understanding of what counted as earned and savings income.
Glad you have it sussed now.
Anyway thanks very much for all of your help with this thorny little problem. On the face of it, it seems that he will be heading for a rabate of something in region of £938.
I trawled the net for calculators but I couldn't find one that would suite this condition, except for this one, which I found reasonable:
http://www.helptheaged.org.uk/NR/rdonlyres/7CFAE249-C800-4554-B33D-3568963719BA/0/calculation_sheet.pdf0 -
A further issue. It seems he had some share dividend in May 2008 but I note that tax has been paid on the dividend at 10% via a "tax credit". So I am assuming that this will not affect his potential for a rebate for 2008 - 2009?0
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