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Tax Free Savings Guide
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Mee said:eskbanker said:Mee said:I've read How the starting rate for savings works - Money Saving Expert page, but I'm still confused as to the £5,000 starting rate for savings affects me.
I earn on average (on a zero hours contract) around 6K at most, but HMRC have reduced my tax code due to supposedly earning around 3K interest (which I need to check) to 923 L tax code. So far this tax year I've worked and earned more than most years and I'm likely to breach the new personal allowance of 9K, but I don't understand how this works with £5,000 starting rate for savings as it seems HMRC seem to think I need to pay tax on less than £5K.
If your earned income is less than £12,570 then you won't be liable for tax on it, and on top of that you can earn at least £6K more in savings interest income because of the allowances explained in that MSE article.1 -
Mee said:I've read How the starting rate for savings works - Money Saving Expert page, but I'm still confused as to the £5,000 starting rate for savings affects me.
I earn on average (on a zero hours contract) around 6K at most, but HMRC have reduced my tax code due to supposedly earning around 3K interest (which I need to check) to 923 L tax code. So far this tax year I've worked and earned more than most years and I'm likely to breach the new personal allowance of 9K, but I don't understand how this works with £5,000 starting rate for savings as it seems HMRC seem to think I need to pay tax on less than £5K.
If you know you will earn more than expected then just update your estimated earnings/pay on your Personal Tax Account and your tax code will be automatically reviewed and updated.
In simple terms the estimated pay is what you expect to see on your P60 next April.
If you estimate it will be £12,570 then you will have no spare allowances and, based on what you have posted, your tax code will change to 1257L.
Your interest of ~£3k would all then be taxed, but at a 0% tax rate (the savings starter rate).1
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