Retiring early: / bank savings tax

bhindi

Hi,


I am considering giving up work soon as the mortgage will be paid up in a few months. I am wondering if my small savings in the bank would become tax free or do I still get charged that. My salary is only about £11k pa, but from next month I will reduce my hours, and so will be earning less than £10k which I believe means at least I wont get taxed on income??


thank you in advance for any answers.

xylophone

Your tax for the current tax year will depend on your income for the current tax year and for subsequent years for your income in those years.

For the current tax year see http://www.hmrc.gov.uk/taxon/worked-examples.htm

For the tax year 2015-16 and subsequently see
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293747/Fact_sheet_template_-_10__tax_9.pdf

purdyoaten

I presume thatyou have been on 11K since April. By the end of November you will have earned £7333 and, assuming that your tax code is 1000L, will have paid tax of £133 or so. If you earn less than £2667 in the remaining four months of the tax year all of this tax will be refunded through your payroll.

At the moment, you cannot register for tax free savings but some or all of it should only be taxed at 10%. We would need to know the amount of interest involved before advising further, particularly with the new proposed rules in April. See the thread below:

https://forums.moneysavingexpert.com/discussion/5100209

bhindi

Thank you, a tax rebate would be nice, but I'm not sure my salary will drop enough for that.


I am more curious about once I fully stop work if I would then be entitled to tax free savings.

bhindi

Savings income.. is this the interest you gain on your savings. (or inclusive of the actual savings deposited?


Eg if at the age of 50 I had no income but £9k of savings in the bank the interest that accrues will not have the tax deducted?

molerat

Only the interest is considered as income, the capital may be taken into consideration when claiming benefits though.

Newly_retired

Once you are no longer a tax payer you can register an account so that the interest is paid gross, ie untaxed.
However if your savings interest is the only income that brings you above the threshold to pay tax, then tax is payable at 10%, instead of 20%.
Neither of these will happen automatically though.

Newly_retired

Just to add that the rules are changing next April. There is another thread on this.