tax free savings limit

wheelz

I fill in a tax return but have limited experience. I'm considering new ISAs or regular savings accounts. What is the maximum amount that I can have as total interest on my tax return that is allowed, before it affects me. I'm a basic rate tax payer.

molerat

You can receive up to £5000 savings interest tax free so effectively it is the difference between your earnings and your tax allowance + £5000.

example :
£10600 tax allowance + £5000 = £15600 - £12500 earnings = £3100 tax free savings interest

If your earnings are in excess of your tax allowance + £5000 then tax is payable on savings interest.

wheelz

This is where I get completely lost. I get my tax allowance from my tax code don't I? What are the £12500 earnings in your example? I have a salary and income from property. How do I find out what my amount is that I can save without having to pay (extra) tax on it from filling in my tax return? Maybe I just put everything in ISAs as this suggestion on this forum to put your money in a regular savings account as you get more interest is just very complicated. No point not putting in an ISA if you then have to pay extra tax on it when you do your tax return.

jem16

wheelz wrote: »

This is where I get completely lost. I get my tax allowance from my tax code don't I? What are the £12500 earnings in your example?

Literally just an example.

How do I find out what my amount is that I can save without having to pay (extra) tax on it from filling in my tax return?

How much do you earn? How much is your rental income?

Tax of 20% is already taken at source from banks. You only pay extra if you are a higher rate taxpayer. However you might pay less.

Maybe I just put everything in ISAs as this suggestion on this forum to put your money in a regular savings account as you get more interest is just very complicated.

Not complicated at all as banks already deduct 20% tax at source. Why get less interest if you can get more?

No point not putting in an ISA if you then have to pay extra tax on it when you do your tax return.

That would only happen if you are a higher rate taxpayer.

sheramber

wheelz wrote: »

This is where I get completely lost. I get my tax allowance from my tax code don't I? What are the £12500 earnings in your example? I have a salary and income from property. How do I find out what my amount is that I can save without having to pay (extra) tax on it from filling in my tax return? Maybe I just put everything in ISAs as this suggestion on this forum to put your money in a regular savings account as you get more interest is just very complicated. No point not putting in an ISA if you then have to pay extra tax on it when you do your tax return.

£12500 is just used as an example.

Replace it in the example with the total of your income and property income,

So your tax allowance plus £5000 less your total income = the amount of interest you can have tax free.

If your total income is more than the sum of your tax allowanc plus £5000 then you pay tax on your interest.

katejo

wheelz wrote: »

I fill in a tax return but have limited experience. I'm considering new ISAs or regular savings accounts. What is the maximum amount that I can have as total interest on my tax return that is allowed, before it affects me. I'm a basic rate tax payer.

As you are a basic rate tax payer, why are you completing a tax return? Perhaps you do have additional income which you haven't mentioned but I have never needed to do one.

jem16

katejo wrote: »

Perhaps you do have additional income which you haven't mentioned but I have never needed to do one.

The OP mentioned rental income in Post 3.

wheelz

It's all new this tax return, when I filled it in last year I found out that you have to declare your interest anyway whether you're a basic or higher tax payer. I can't remember whether my property income took me into the higher tax rate category. I am aware of how tax is deducted from a savings account before it gets to you (if not an ISA), that used to be my reason to have an ISA but now with higher interest on non-ISAs you have to start thinking about this.

Tax allowance in your helpful comments is the tax code (amount). This tax is just so complicated. I just want to get an isa or a savings account, but it sounds I have to do my tax return first to work it all out. Maybe that is the order but it took me weeks last time, mind you half of the time was spent getting lots of logging in codes on gov and hmrc and tax return websites! and codes that were sent in the post and you had to wait for. Now I don't have that anymore.

mgdavid

There is a single UTR and password for the HMRC SA site, and it lasts year-on-year. I don't share your view that it is complicated, in fact it is one of the easiest websites I use (the very best being VED).

jem16

wheelz wrote: »

It's all new this tax return, when I filled it in last year I found out that you have to declare your interest anyway whether you're a basic or higher tax payer.

Yes you do as you have to declare all income on SA. However you are the credited with the tax already paid so there is only more tax to pay if you are a higher rate taxpayer.

I can't remember whether my property income took me into the higher tax rate category.

You could always log in and check your return from last year.

This tax is just so complicated. I just want to get an isa or a savings account, but it sounds I have to do my tax return first to work it all out.

It's not at all complicated but you do at least have to have an idea of your total taxable income. Surely that can't be difficult?