Savings tax 10%?

roxy28

If you have more than £10,000 in savings but your income has now dropped to £10,500, can you claim the 10% savings tax in place of 20%.

Is the interest from your savings counted towards income in this instance?

nomunnofun

It is all about the order of rates of income tax!

In your example you have £10500 of income and a personal allowance of 9445 - you will be liable to pay tax on 1055 on your non-savings income.

However, the first £2790 of savings interest is taxed at 10% PROVIDING THIS HAS NOT BEEN USED BY OTHER INCOME WHICH IS TAXED FIRST.

In your example you have £1735 remaining of the 10% rate band. The first £1735 of the interest should be taxed at 10%. if it is taxed at 20% you can claim the difference. The 'more than £10000 in savings' comment would appear to be irrelevant.

roxy28

Thanks for the reply. No other income which has been taxed,just the income given and the savings, will i have to contact the bank or the tax people to see about this

le_loup

Your tax office. Give them a ring, they will take the details over the phone and tell you if you are going to get a refund.

zygurat789

roxy28 wrote: »

If you have more than £10,000 in savings but your income has now dropped to £10,500, can you claim the 10% savings tax in place of 20%.

Is the interest from your savings counted towards income in this instance?[/QUOTE]

Do fishes swim?

In your example if you are under 65:-

Income..............................................£10,500
Less PA................................................£9,440
Taxable................................................£1,060 at 20%

Interest (say)...................................... .£3,000
Savings rate band balance (2790-1060)..£1,730 taxable at 10%
Balance of interest.................................£1,270 taxable at 20%


Don't bother contacting the bank, they can't help, just claim from the taxman. In the example above you would be repaid £173

xylophone

http://www.hmrc.gov.uk/taxon/worked-examples.htm

roxy28

Not finding it easy on some of those examples. Can you work out this one with the income very close to the personal allowance and say a big savings figure, just to see how the actual savings play their part. Income = £9,500 Savings =£40,000.

dtaylor84

roxy28 wrote: »

Not finding it easy on some of those examples. Can you work out this one with the income very close to the personal allowance and say a big savings figure, just to see how the actual savings play their part. Income = £9,500 Savings =£40,000.

Taxable Income of £60, taxed @20%: £12.

10% band £2790 reduced by £60 to £2,730

Savings £2730 taxed @10%: £273
Savings £32,010-£2,790 (£29,220) taxed @20%: £5,844
Savings £40,000-£29,220-£2,730 (£8,050) taxed @40% £3,220

Total tax due: £9,349

nomunnofun

dtaylor84 wrote: »

Taxable Income of £60, taxed @20%: £12.

10% band £2790 reduced by £60 to £2,730

Savings £2730 taxed @10%: £273
Savings £32,010-£2,790 (£29,220) taxed @20%: £5,844
Savings £40,000-£29,220-£2,730 (£8,050) taxed @40% £3,220

Total tax due: £9,349

While this calculation is spot on and should solve the problem for the op, I am not sure that he/she receives interest of £40000 per annum - perhaps the interest on £40000?

zygurat789

Since earnings are greater than the personal allowance and the total of income exceeds the personal allowance plus the 10% rate band, the saving will be:
the savings rate band minus the excess of earnings over the personal allowance, or the actual interest received if lower, times the saving in tax.

In your example, assuming an interest rate of 3% on £40,000.
Earnings.............................................£9,500
Personal allowance...............................£9,440
Taxable..............................................£....60 Taxed at 20%
Interest...£40,000 X 3%......................£1,200
Savings rate band (restricted)..............£1,200 taxed at 10%

Since the interest was originally taxed at 20% the refund is £120

roxy28

Thanks for the examples again, the only one i can make any sense of is the last one. £40,000 x 3% = £1,200. The other one which ends total tax due £9,349 is just over my head.