the 10% tax band

Percybridge

Can someone tell me how the 10% band works.
If you have non savings income of £5000 and £20,000 savings income, do you pay tax at 10% on the first bit (after personal allowance) and 20% after that.
Someone told me that if your non savings income took you over £2320 then you lost the right to pay at 10%.
Does anyone know how it works.
Thanks anyone

Money_Grabber13579

Percybridge wrote: »

Can someone tell me how the 10% band works.
If you have non savings income of £5000 and £20,000 savings income, do you pay tax at 10% on the first bit (after personal allowance) and 20% after that.
Someone told me that if your non savings income took you over £2320 then you lost the right to pay at 10%.
Does anyone know how it works.
Thanks anyone

That's correct. If your non-savings income is over £2320 for 08-09 tax year (Not sure what the figure is for 09-10 tax year is yet) than you lose the right to the 10% band.

Percybridge

Is it the income after taking off the personal allowance that determines eligibility for the 10% band.
eg If your non savings income for 08/09 was £7000, if you took off the personal allowance of £6035 you would be left with £65. Do you then get the 10% band?

jem16

Percybridge wrote: »

Can someone tell me how the 10% band works.
If you have non savings income of £5000 and £20,000 savings income, do you pay tax at 10% on the first bit (after personal allowance) and 20% after that.

Yes you do.

Someone told me that if your non savings income took you over £2320 then you lost the right to pay at 10%.

If you have earned income of over £6035 plus £2320, i.e. £8355 (tax year 09/10) then you lose the 10% band.

However if you have earned income between £6035 and £8355 then you will get some of the 10% band.

If you have earned income less than £6035 then you will get all of the 10% band.

eg If your non savings income for 08/09 was £7000, if you took off the personal allowance of £6035 you would be left with £65. Do you then get the 10% band?

Yes you will.

trevormax

Percybridge wrote: »

Is it the income after taking off the personal allowance that determines eligibility for the 10% band.
eg If your non savings income for 08/09 was £7000, if you took off the personal allowance of £6035 you would be left with £65. Do you then get the 10% band?

Based off of 08/09 figures if you took the PA of 6,035 from £7,000 you would be left with £965, not £65.

Take this from the 10% band of 2,320 and you would be left with 1,355 savings income which can be taxed at 10%. Any remaining savings income is then taxed at BR and HR.

suso

Your allowance is allocated the following way

Earned Earnings (your job basically) then
Bank And Building Society Interest

So if in your example you earn 7000 this tax year.

deduct your personal allowance from your earnings (7000 - 6475 = 525)
The 525 is taxed at 20%
The savings band for this year is 2440 so to find out how much you can have at 10% deduct the 525 from 2440 = 1915
So you only need to pay tax at 10% on the first £1915 of interest.

The thing to remember is that the bank will be deducting tax at 20% so you would need to claim it back at the end of the year.

derrick

[FONT=&quot]HMRC examples; ;-

[/FONT] See an example where a saver has no earned income.

See an example where a saver has earnings of less than their personal allowance.

See an example where a saver has earnings above their personal allowance and they have exceeded the starting rate limit for savings.

See an example where a saver has earnings above their personal allowance but they don’t exceed the starting rate limit for savings.