Savings in retirement

sleepless_saver

wannaberichbtch wrote: »

Sorry to hijack this thread but the information may be useful to others as well. Next year and the following year I am considering salary sacrifice into my occupational pension to take my earnings down to £10,500 pa, as I read the rules I would also be entitled to tax free interest on my cash savings in banks and building societies(Outside ISA obviously) If I complete an R85 and that interest payment is below £5000 per annum, am I correct? Thanks in advance for clarification.

It's a neat idea but I don't think so. See http://www.hmrc.gov.uk/taxon/bank.htm

bigadaj

sleepless_saver wrote: »

It's a neat idea but I don't think so. See http://www.hmrc.gov.uk/taxon/bank.htm

I think that link is outdated, it doesnt mention the £5000 savings tax free limit that was announced in the budget.

However I think always learnin point is valid and will significantly affect such plans, full time minimum wage takes someone over £13000 per year so the actual benefit is much more limited. Might still work for that less than two grand though.

wannaberichbtch

Thanks Alwayslearnin and Bigadadaj you both raise good points. For me personally I work a 30 hour week so this is more doable, but this could still have benefits for someone on a 40 hour week. If someone had say £50,000 earning a currently generous 4% gross, they will achieve £2,000 in interest payment, and would pay £400 in tax. For the effort of completing a few forms and the price of the stamps, this cost would be eliminated (Assuming salary sacrifice falls within the new rules of course).

bigadaj

wannaberichbtch wrote: »

Thanks Alwayslearnin and Bigadadaj you both raise good points. For me personally I work a 30 hour week so this is more doable, but this could still have benefits for someone on a 40 hour week. If someone had say £50,000 earning a currently generous 4% gross, they will achieve £2,000 in interest payment, and would pay £400 in tax. For the effort of completing a few forms and the price of the stamps, this cost would be eliminated (Assuming salary sacrifice falls within the new rules of course).

I'd assume this is an anomaly that will be closed at some point, if it is valid. It also means that you have to live. Off a very limited income which would be difficult for many, however similar approaches have been suggested to take advantage of working tax credits and other benefits.