Maybe no tax on my savings next year

zygurat789

The cash ISA limit is now £15,000 pa so a couple are able to put £600 pa worth of savings income, assuming 2% interest rate, into an ISA each year so the people who are really going to benefit are those with very large cash deposits, but not much in the way of income. If ever interest rates should rise again then it would be a different story

[Deleted User]

patanne wrote: »

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.

What a great long report patanne. I'll take time to go through it all. Thanks so much for posting it.

Crimson

[Deleted User]

molerat wrote: »

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

That is so encouraging, molerat. I'll take time to look at the link you have given. It almost sounds too good to be true but if I (and lots of others too I hope) can get interest free of tax it really will help, thank you.

Crimson

[Deleted User]

kidmugsy wrote: »

(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).

Thanks very much kidmugsy. If it really is tax free for me I'll do as you suggest. I don't have a lot of savings but every penny makes a difference. My ISA pays very little - I think it is 1.4 or 1.5% so I'll do some homework.

I'm always saying it but this site really is so helpful - thank you all.

Crimson

[Deleted User]

patanne wrote: »

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.

patanne - this really helps me. Sometimes I feel so 'dim.' Reading it as you have put it like a Case Study tells me that, because all my gross income and the interest I get from my savings will be no where near £15,500 (my personal allowance is £10,500) I should be able to benefit from this nice unexpected wee 'bonus.'

I'll still do the 'homework' but thanks for making it so easy to understand.

Crimson

[Deleted User]

zygurat789 wrote: »

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.

Thanks zygurat. If I'm understanding properly now, and because I don't have a huge amount of savings, I might benefit from one of the accounts of 4% gross instead of my ISA 1.4 or 1.5%. Gross income from 'everywhere' will be nowhere near £15,500 so I should be 'safe' - I think. Your post on Over 50's in April is what got me thinking so thank you again zygurat .

Crimson

agrinnall

While it probably will be worth you opening some high rate current accounts they are all limited in how much you can have in them earning interest, so if your savings in ISAs are currently enough to be earning thousands in interest then that will be too much capital for the current accounts. So you'll also need to look at alternatives that may pay a bit less but have higher limits - some of those may still be NISAs, but you should also consider the new Pensioner Bonds coming in next year, although I believe you can't use a R85 with them and will have to reclaim the withheld tax.

patanne

Don't bother reading that long thing of mine. Molerat's is a lot clearer and the case study is an excerpt from that which I thought covered both our circumstances.

[Deleted User]

agrinnall wrote: »

While it probably will be worth you opening some high rate current accounts they are all limited in how much you can have in them earning interest, so if your savings in ISAs are currently enough to be earning thousands in interest then that will be too much capital for the current accounts. So you'll also need to look at alternatives that may pay a bit less but have higher limits - some of those may still be NISAs, but you should also consider the new Pensioner Bonds coming in next year, although I believe you can't use a R85 with them and will have to reclaim the withheld tax.

Thank you Agrinnall. My total gross income is not over £14000 including my pension and the interest so I really don't have that much.

If I have £10500 tax free even with a small pension increase my total income from everywhere will be well below £15500 next year - so hopefully I'll have no tax on my savings interest after all.

Many thanks.

Crimson

agrinnall

What I was trying to say is that if the total of your savings is such that it generates interest income in the thousands of pounds then you'll need to look for places beyond the current accounts to place that much money for maximum effect.