Tax Free Savings Guide

stphnstevey

What about if your salary and interest are below £17k, but dividends takes you up to the basic rate band? do you still get the £5k +£1k tax free allowance ?

BazzaG

How does the new interest-on-savings tax regs affect the 65+ Pensioner Bonds? Although I am a non-tax payer due to my income being below the threshold, I am still taxed on the interest on my bond and have to claim a refund from HMRC!

Archi_Bald

Any interest we add to your Bond on or after 6 April 2016 will be added without any tax being taken off.

This is from http://www.nsandi.com/files/published_files/asset/pdf/65-guaranteed-growth-bonds-maturity-leaflet.pdf

You'll only have to reclaim up to today.

wollidoodl

The article indicates that this is possible from the tax year starting April 5th 2015. Does any one know if claims can be made for tax years prior to this ?

eskbanker

wollidoodl wrote: »

The article indicates that this is possible from the tax year starting April 5th 2015. Does any one know if claims can be made for tax years prior to this ?

My understanding is that no, the April 2015 changes weren't retrospective and only applied to the 2015/16 tax year onwards.

jonon

How does savings interest tax work with NI payments and student loan repayments? I'm self employed.


Does the tax free allowance only relate to your personal allowance?



Thanks

Dazed_and_confused

There are no real "allowances" for taxable savings interest other than the Personal Allowance.

Depending on your individual circumstances you may be eligible to have £5,000 of interest taxed at the savings starter rate (currently 0%) or the Personal Savings Allowance rate which is also currently 0%.

Ultimately though it is taxable income so for example if you had business profits of £25,000 and savings interest of £1200 your tax position in the current tax year would look like this (assuming you aren't Scottish resident for tax purposes)

Profits £25,000
Interest £1,200
£26,200 less Personal Allowance £11,850 = £14350

£13150 taxed at 20%
£1000 taxed at 0%
£200 taxed at 20%

Bottom line is you still have £26,200 of taxable income and £14,350 gets taxed, albeit some at a 0% rate.

jonon

Thanks Dazed and Confused. So regarding National insurance and student loan repayments, savings interest are just seen as profits? and the £1000 allowance for basic rate tax payers has nothing to do with these?


So you could still get 9% NI tax and 9% student loan repayments on savings interest above £0? (once over your NI allowance, repayment threshold etc?

Dazed_and_confused

There is no £1000 "allowance" for savings.

In the example I gave the line in red is commonly known as the Personal Savings Allowance but in reality is a 0% tax rate. I don't know the income rules for Student Loans or even if interest is counted in the first place but the point I was making is that, in the example I gave, your taxable income would be £26,200, not £25,200.

You don't have to pay National Insurance on taxable interest so this can be ignored for Class 4 (and Class 2) National Insurance purposes.

£13150 taxed at 20%
£1000 taxed at 0%
£200 taxed at 20%

murphydavid

jonon wrote: »

Thanks Dazed and Confused. So regarding National insurance and student loan repayments, savings interest are just seen as profits? and the £1000 allowance for basic rate tax payers has nothing to do with these?


So you could still get 9% NI tax and 9% student loan repayments on savings interest above £0? (once over your NI allowance, repayment threshold etc?

I believe that the answer is no. Savings interest are seen as savings interest and are taxed at 0% on the first £1000 (or first £5000 see https://www.moneysavingexpert.com/savings/tax-free-savings/) and 20% on the rest. Banks no longer pay the tax at source.
Student loan repayment deductions are made from the net pay/profit after tax and national insurance has been calculated and deducted but the calculation of the deduction is based on the gross pay/profit (before tax and NI) for the pay period. No deduction will be made if the statutory threshold is not exceeded. see https://forums.moneysavingexpert.com/discussion/3913511/tax-relief-on-dd-student-loan-payments

In addition (depending on the type of work you do) you may and probably will have tax free expenditures related to your work / company. (for instance self employed child minders get see https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim52751) A complicated field. You may even want to start a company and make yourself an employee and pay yourself a low salary and plow your profits back into your company (for which you may want an accountant)

Its been a while since I retired but I have never included interest in my profit line on my tax return. Maybe things changed. Can't you tell by looking at the tax return form?