Maybe no tax on my savings next year

[Deleted User]

Hello

I am posting here although I have posted on 'Over 50's' and I am sorry I don't know how to change it in case this is a better place to ask. It is after just browsing and coming across zygurat's post on 01 April 2014 at 2.46 pm. Here is my post about maybe not having to pay tax on my savings next year:

"I was browsing and I have just read your post zygurat. I did not know about this and for the year 2015-16 I am sure my gross income will still be well under £15,000 even after any small increase in April. I pay tax just now on my pension and on all my (modest but important to me) savings except the ISA I have.

Would you, or anyone please, be able to give me a link to show that I might not have to pay any income tax on my savings from April 2015? I understand I would still have to pay tax at 20% above £10,500 on my pension. Even just to get tax free on my modest savings interest would be great - every penny helps.

If I really am eligible, and I think I may be, would I need to fill in more than one of the forms R85 because I have a TSB account and a small Bank of Scotland savings account I pay tax on? I don't pay any tax on my ISA.

Any information would be really appreciated, thank you. Should I keep my question here or would it be better on one of Martin's forums about Tax, please?"

Thank you. Crimson.

patanne

I am sure someone will be along soon to confirm, but I think that your savings interest has to be what pushes you over your personal allowance. That is certainly how the current 10% band works, this new 0% band is to replace that. So if your pension is over your personal allowance I don't think this will apply. Wish it did as I too would benefit.

I've just checked by googling & it certainly reads as you said but I am sure when I read the analysis of the statement that that was not what was said - so I too will be awaiting a reply to this as it should certainly save me some money.

I really do hope you are right!

CLAPTON

Deleted_User wrote: »

Hello

I am posting here although I have posted on 'Over 50's' and I am sorry I don't know how to change it in case this is a better place to ask. It is after just browsing and coming across zygurat's post on 01 April 2014 at 2.46 pm. Here is my post about maybe not having to pay tax on my savings next year:

"I was browsing and I have just read your post zygurat. I did not know about this and for the year 2015-16 I am sure my gross income will still be well under £15,000 even after any small increase in April. I pay tax just now on my pension and on all my (modest but important to me) savings except the ISA I have.

Would you, or anyone please, be able to give me a link to show that I might not have to pay any income tax on my savings from April 2015? I understand I would still have to pay tax at 20% above £10,500 on my pension. Even just to get tax free on my modest savings interest would be great - every penny helps.

If I really am eligible, and I think I may be, would I need to fill in more than one of the forms R85 because I have a TSB account and a small Bank of Scotland savings account I pay tax on? I don't pay any tax on my ISA.

Any information would be really appreciated, thank you. Should I keep my question here or would it be better on one of Martin's forums about Tax, please?"

Thank you. Crimson.

the full facts always help


15,000 has no significance for tax year 2015-16


the tax free allowance may or may not be 10,500 that year.


so if your total income
i.e. pension plus grossed up saving interest (excluding ISA) then you pay tax on the excess over 10,500


depending upon your pension income, some or all may be at 20% or some may be at 10% but all will be taxed

patanne

I was under the impression that the 10% tax band had to start BEFORE your personal allowance ran out (ie after salary & pension income). Also for tax year 2015-16 the band had been reduced to 0% and widened to £5000. But surely if your earnings (excl interest) were above the personal allowance then this would not apply.

Put another way - you can't use R85 if you pay any tax.

patanne

Well I have just re-read the info from HMRC and it does read to me as if you can get savings tax free even if you do pay tax on your other income. I really do hope I am reading that correctly.

I don't know how to post a link but I googled tax on interest 2015-16.

Changes announced at Budget 2014: Summary of changes
Starting Rate for Savings from 6 April 2015
As announced by the Chancellor at Budget 2014, fr
om 6 April 2015 the starting rate of tax
for savings income (such as bank or building society interest) will be reduced from 10 per
cent to nil, and the maximum amount of taxable savings income that can be eligible for this starting rate will be increased from £2,880 to £5,000.
One of the effects of this change, when combined with changes to the tax-free personal
allowance, is that savers will not be liable for tax on any interest they receive if their total
taxable income for 2015-16 is less than £15,500.
This figure will be £15,660 for people born before 6 April 1938. It may also be higher for
people entitled to the Married Couple's Allowance (for those born before 6 April 1935) and people entitled to the Blind Person's Allowance. In addition, a different figure may be relevant where married couples and civil partners transfer partof their personal allowance.
Further details of how these will affect eligibility for the starting rate will be published
nearer 6 April 2015, when this change comes into effect.
Registering for interest payments without tax deducted (Form R85) from 6 April 2015
The eligibility rules for completing a form R85 will also change from 6 April 2015, to
enable more savers to register to receive interest payments without tax deducted.
Currently an R85 can be completed by a saver whose total taxable income for the tax year will be below their tax-free personal allowance. From 6 April 2015, a saver who is unlikely to be liable to tax on any of their savings income in the tax year can complete an R85 and register to receive interest without tax deducted – even if they pay tax on other (non-savings) income.
In practice, this means if a saver’s total taxable income will be below the total of their tax-free personal allowance plus the £5,000 starting rate limit for savings, from 6 April 2015 they can register to have interest paid on their accounts without tax deducted, using form R85.
Details of what is taxable income can be found at:
http://www.hmrc.gov.uk/incometax/taxable-income.htm
HMRC will work with account providers and interested groups to communicate the new
rules to affected savers in good time for the change on 6 April 2015.
2


Frequently asked questions
What is changing on 6 April 2015?
From 6 April 2015, many more people will no
longer be liable for tax on their savings
income, such as interest they receive on thei
r bank and building society accounts. This is
most likely to affect people with low overall
incomes, or people whose income is mainly
from their savings.
You could benefit if:
•
your total taxable income in 2015-16 will be below £15,500, or
•
your total taxable non-savings income in 2015-16 (such as earnings or pensions)
will be below £15,500.
What counts as savings income?
This includes interest from savings account
s you hold with banks, bu
ilding soci
eties and
other account providers, such as credit unions.
It also includes interest dist
ributions from authorised unit tr
usts and open-ended investment
companies and income which is not interest,
such as the profit on government or company
bonds which are issued at a di
scount or repayable at a prem
ium. Other types of savings
income include purchased life annuity payments
and gains from certain
contracts for life
insurance.
What non-savings income should I take into account?
When considering your total taxable non-savi
ngs income, you should include any of the
following:
•
State and other pensions;
•
Income from employment and pr
ofits from working for yourself;
•
Payments of Jobseekers Allowance (J
SA) and taxable Incapacity Benefit;
•
Income from savings (other than from ta
x-advantaged accounts such as ISA); and
•
Any other taxable inco
me that you receive.

molerat

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293747/Fact_sheet_template_-_10__tax_9.pdf

The rules are exactly the same as they are now except the limit is being increased to £5K and the 10% rate is being reduced to 0%. Any interest that falls between your pension income and £15500 total income can be claimed tax free so if your pension + any other income is say £11500 you will be able to receive tax free interest of £10500 + £5000 - £11500 = £4000

kidmugsy

Deleted_User wrote: »

... for the year 2015-16 I am sure my gross income will still be well under £15,000 even after any small increase in April. ...I might not have to pay any income tax on my savings from April 2015? I understand I would still have to pay tax at 20% above £10,500 on my pension.
If I really am eligible, and I think I may be, would I need to fill in more than one of the forms R85 because I have a TSB account and a small Bank of Scotland savings account I pay tax on? I don't pay any tax on my ISA.

(i) Yes, you'll need an R85 for each account.
(ii) In your shoes I'd look at the interest-bearing current accounts currently yielding 4%-5% gross (TSB, Nationwide, Lloyds).

patanne

I'm off to see how much I will save next year - thanks everyone!

ManAtHome

kidmugsy wrote: »

(ii) In your shoes I'd look at the interest-bearing current accounts currently yielding 4%-5% gross (TSB, Nationwide, Lloyds).

And possibly moving some or all of the cash ISA into these accounts as well - you can pay back in (to an ISA) up to £15k a year if/when interest rates rise.

Could be 'interesting times' for cash ISAs next year...

zygurat789

CLAPTON wrote: »

the full facts always help

15,000 has no significance for tax year 2015-16
the tax free allowance may or may not be 10,500 that year.
so if your total income
i.e. pension plus grossed up saving interest (excluding ISA) then you pay tax on the excess over 10,500
depending upon your pension income, some or all may be at 20% or some may be at 10% but all will be taxed

The £15,000 is not NOW the correct figure, however, it was the latest figure given by GO who tends to up his figures every time a tory defects, when the original post was made.
The latest figure is £10,500 born before 5/4/48 but may be increased at the budget.
I interpret HMRC to be saying:-

For the calculation you need to split your total income between savings interest and the rest.
If the rest of your income is less than your PA, BA, AA etc then you will be taxed on your savings interest up to a gross of £5,000 (boo) at 0% (hooray). There may be a reason for it being taxable at 0% rather than tax free but, if there is, I haven't read of it yet. All gross interest over £5,000 is taxed at 20%.
If the rest of your income exceeds your PA etc then you will be taxed at 20% on the excess, however, you will pay tax at only 0% on any gross savings interest up to a total of, currently, £15,500 and 20% thereafter.

OP, Why don't you puy all your savings into an ISA, assuming you can get equivalent rates, it would save all the hassle.

patanne

I too thought that the interest had to start before you reached your personal allowance, however, after reading the examples given in the link in post 6, I have changed my mind.

This is what I mean: quoted below

Case study: Sharon
From April 2015, Sharon will receive £14,000 per year from her pension. Her tax-free personal allowance is £10,500, so she is taxed at 20% on £3,500. Sharon also earns £2,000 a year in savings income. Sharon’s total income is £16,000. Because Sharon’s total income is more than her personal allowance plus £5000, she is not eligible to register for tax-free savings, but will be able to claim back some of the tax on her
savings income. She can do this by filling out an R40 form and sending it to HMRC.