Savings and tax - question

Gorgeous_George

Hi

Looking at the HMRC website (link), there is mention of a 10% tax rate for savings income up to £2,440.

Does this mean that a basic rate or higher rate taxpayer earning £2,440 (gross) or less per year in interest will pay just 10%? I'm sure my banks and building societies take 20% at source but I will check later.

Also, if you earn £2,441 from savings income, I read the aforementioned link as saying that you will lose the 10% tax rate (and therefore pay at 20% for a basic rate taxpayer like myself.).

GG

jem16

Gorgeous_George wrote: »

Hi

Looking at the HMRC website (link), there is mention of a 10% tax rate for savings income up to £2,440.

There is.

Does this mean that a basic rate or higher rate taxpayer earning £2,440 (gross) or less per year in interest will pay just 10%? I'm sure my banks and building societies take 20% at source but I will check later.

Basic rate taxpayers do not have access to the 10% band. They will still pay 20%. Higher rate taxpayers will pay 40%, 20% will be taxed at source via the bank and the other 20% via the tax return.

Also, if you earn £2,441 from savings income, I read the aforementioned link as saying that you will lose the 10% tax rate (and therefore pay at 20% for a basic rate taxpayer like myself.).

Nothing to do with savings income.

Basically if you earn more than £6475 plus £2440, total £8915 none of the 10% savings band is available to you. Less than this amount you may be able to utilise some of it.

Gorgeous_George

Ah yes, reading it again it makes more sense - if a little unfair. Just another fiddle to cut tax rates while still screwing middle England.

GG

juicyjude

So I may earn just over the £6475 and my understanding is that anything over thatI will have to register again as receiving net interest, within the tax year 09/10

Milarky

AIUI, the 10% is still available to anyone with earnings less than the personal allowance but the balance of whose income is purely savings interest

Eg Earnings of £5500, Savings income of £24500 (unlikely as this seems), TOTAL £30000

Tax on EARNINGS
0-5500 @ 0% = £0
Tax on SAVINGS
5501-6475 @ 0%
6476-8915 @ 10% = £244
8916-30000 @ 20% = £4217

COMPARE Earnings of £24500 and Savings income of £5500

Tax on EARNINGS
0-6475 @ 0% = £0
6476-24500 @ 20% = £3605
Tax on SAVINGS
24501-30000 @ 20% = £1100

In other words, income from savings is always counted after any earnings - so '10%' is only available where earnings do not exceed 8915 in the examples above - otherwise it is all taxed at 20%

jem16

juicyjude wrote: »

So I may earn just over the £6475 and my understanding is that anything over thatI will have to register again as receiving net interest, within the tax year 09/10

Yes you would as you are no longer a non-taxpayer. You would then have to claim a refund as you would be entitled to at least some of the 10% band.