Savings free of tax for total incomes less than £15,500 from April 2015

cepheus

Archi_Bald wrote: »

Very misleading thread title, and other incorrect info thrown into some posts.

The principle of calculations will remain the same as befor. You can find some worked examples here: http://www.hmrc.gov.uk/taxon/worked-examples.htm
Just substitute the old with the new limits/percentages.

The important question is do savings include income from other investments rather than basic accounts and pensions? I don't think those examples make it clear.

I've adjusted the title to make it clear it's the savings element which would be tax free

Archi_Bald

cepheus wrote: »

The important question is do savings include income from other investments rather than basic accounts and pensions? I don't think those examples make it clear.

It's all about tax on income from savings, not investments. Savings doesn't include pensions, either - a pension payment counts as income.

The easiest to explain this is that "income from savings" means 'interest from UK bank and building society accounts'.

teddysmum

Assuming a 'massive' 2% interest you'd need a nest egg of £250000 too earn £5000 interest. I wish.

Eco_Miser

cepheus wrote: »

The important question is do savings include income from other investments rather than basic accounts and pensions? I don't think those examples make it clear.

Following a link given by cepheus above gives

The charge to income tax on interest is contained in Chapter 2 of Part 4 of ITTOIA05 at section 369, which includes the following.

• Interest from UK bank, building society and other savings accounts
• Interest on gilts, and on other securities issued by governments or companies
• Interest on loans made privately to individuals or companies
• Interest received on delayed payments or refunds
• Interest received by UK residents on bank accounts, securities or other investments situated abroad.

So, up to £5000 of income from Gilts, Corporate Bonds, and fixed interest funds will be tax-free if other taxable income is less than £10,500.

cepheus

Eco-Miser I'm not too sure about that. I'm mostly interested in P2P. If we look at Martin's old article on P2P he says

You pay tax like savings
The interest you earn is subject to income tax in exactly the same way as normal savings. So if you're a basic rate taxpayer you lose 20%, higher rate 40%, top rate 45% off the earnings. You'll be sent an annual interest statement in the same way.

but not sure if he means it, in this context. However, if they do qualify as savings rates of 5-10% are practical, higher using ones abroad, so you don't need a vast sum to get returns of £5000.

Mattygroves2

Interest from P2P lending goes in the untaxed interest box on a self assessment tax return and is included in the "interest received from UK banks and building societies" line on the tax calculation produced at the end of the self assessment process so as far as I can see it falls into the new £5,000 allowance (provided the other rules are OK).

I managed £5k of bank interest last year from funds that are effectively set aside for repayment of my mortgage in 4 years time (so can't risk S&S for this cash) - took about £160k to do it. At the time the rates were higher (even with tax deducted) than the mortgage interest so no point reducing the mortgage. Might be a different story this year as rates will be lower.

TCA

How do the new rules work with regard to dividend income?

"This will mean that anyone with a total income (including wage, pension, benefits and savings income) of less than £15,500"............

I haven't seen dividends specifically mentioned anywhere, so I'm wondering if someone with say a wage of £10k, bank interest of £5k and dividend income of £10k, would effectively only pay the 10% tax on dividends already deducted at source?

DragonQ

If I get a job immediately after my PhD finishes, I may end up earning around £15k for the rest of the tax year so this could be useful for me.

Chadsman

DragonQ wrote: »

If I get a job immediately after my PhD finishes, I may end up earning around £15k for the rest of the tax year so this could be useful for me.

A PhD is never finished... it is abandoned.

le_loup

TCA wrote: »

How do the new rules work with regard to dividend income?

Income is income is income.