2015/16 Tax Year no tax due if less than £15,600 income including Savings income.

TCA

buglawton wrote: »

Well eventually I will be submitting a tax return for the person whose tax agent I am. The income will as it happens be somewhere in the £12-15k range and include rental income. So it will be interesting to find out how the auto calculation goes when I fill the online Self Assessment form in.

NI is important - I see it as a tax by another name so this will be a test of the "No tax for the 1st £15,600" idea.

From what I read this afternoon, as far as NI goes, it'll depend which bit of the SA form you fill in. If you submit the rental income as UK property income, then income tax will be calculated at the individual's (personal) marginal rate and that's all you'd pay. NI would only come into it if you fill in the self-employed section and you wouldn't do that for someone that wasn't registered as self-employed.

How much of the £12k-£15k is bank interest?

buglawton

Practically none. I think the new savings allowance will be cash interest and share interest only and not cover property investment. It would be nice if HMRC would be a lot clearer on these things, they seem to have a million web pages to express themselves one.

kidmugsy

buglawton wrote: »

I think the new savings allowance will be cash interest and share interest only.

Share interest? Surely dividends have never been treated as interest, have they?

TCA

buglawton, the HMRC calculator (for tax-free savings interest) that I linked to previously includes both self-employed earnings and property rental income, so it's definitely included as taxable income whichever way you report it. It has to be. If you're still not convinced, check out this form:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414637/R85_Helpsheet_150318.pdf

But if your friend/relative/client has virtually no savings interest anyway, then he or she will hardly benefit from the new rule. If he/she has taxable income of £12,000 and let's say £100 of savings interest, then they would still pay tax on £1,400 (£12,000-£10,600) but they'd get their savings interest tax-free.

It's two separate allowances of £10,600 for non-savings income and £5,000 for savings income.

TCA

buglawton wrote: »

I think the new savings allowance will be cash interest and share interest only and not cover property investment.

I think you're confusing what property rental income is classed as. It is definitely not included in the £5,000 savings income allowance. It is non-savings income, which is set against the personal allowance of £10,600.

Dividends from shares do not appear to count as savings income either as it doesn't look that they're included in taxable income (for this purpose) when you look at the HMRC R85 helpsheet.

buglawton

My understanding now is that if you've £15,600 income, even if it includes £5,000 savings interest, it will likely mean paying around £300 National Insurance, depending on how the first £10,600 was earned, e.g. via a part time job.
National Insurance is still a tax.
From the above it does sound as if rental income does not attract NI.
If the £5,000 is share dividends then again, there's tax to pay.

The picture is not as rosy as painted by the thread title here alas.
But it made good vote grabbing headlines I'll say that.

bowlhead99

You take your employment income and your rental business income and your (gross) dividend incomes first, and start paying tax on them as usual - in other words, 0% tax for the first £10600 and the normal basic rate thereafter.

If the total of that lot together is ALL under £15600 (in other words, you have used up the £10,600 personal allowance but have NOT busted all the way through the next £5000 band), you will have some of that £5000 band remaining to you, to be used on savings interest. So if you had £15000 of earnings, business income, dividends etc, that would leave £600 of 'space' in the £5000 band for you to receive interest income at the special 0% rate.

If you had £200 of interest income in that situation it would all fit into that space and there would be no tax to pay on the interest. If you had £1000 of interest then some of it would fit in your 0% space and some would not.

But this tax on the interest piece is only to do with the 'starting rate for interest income' of 0% within the first £5k above personal allowance. It doesn't mean there are no other taxes to be paid on rental income, employment income, dividend income etc. They continue in the same way as they were doing last year.

buglawton wrote: »

NI is important - I see it as a tax by another name so this will be a test of the "No tax for the 1st £15,600" idea.

When the original poster put up their headline of "no tax due if less than £15600 including savings income" ; they should have more properly titled it "no tax due on savings if income less than £15,600 including savings income"

Because that is what the rules say. There is a new £5000 band which gives a starting rate at 0% for SAVINGS INCOME ONLY. The politicians have been announcing this by saying that if your total income is below £15600 you will not pay tax whatsoever on your savings. They have not been saying you can get money from employment or a property business without paying taxes at that level of income, or that any of the rules on dividends have changed.

You are in the 'savings' section of the forums, not the 'tax' section or the 'what do you class as a pseudo-tax' posts on the 'debate the economy' section. So, when the OP gave the headline of no tax due if total is under £15600, they meant no tax due on savings.

Whether you see NI as 'tax by any other name' is not really relevant to this new allowance which is a 0% band for savings interest income. NI is not savings interest income tax. Neither is the VAT I pay on my lunch. Neither is the tax on the salary I get. Neither is the tax on the property income or my self employed business profits if I had those. So, I wouldn't expect to suddenly be exempt from those taxes just because some new rule comes in about savings interest.

bowlhead99

buglawton wrote: »

My understanding now is that if you've £15,600 income, even if it includes £5,000 savings interest, it will likely mean paying around £300 National Insurance, depending on how the first £10,600 was earned, e.g. via a part time job.
National Insurance is still a tax.

Politicians have never said they are stopping national insurance.

If the £5,000 is share dividends then again, there's tax to pay.

Not really as if you are anything below a 40% taxpayer you will receive a tax credit which will cover the 10% tax liability on dividend income. You will receive and keep every single penny that the company sends you.

The picture is not as rosy as painted by the thread title here alas.
But it made good vote grabbing headlines I'll say that.

As mentioned, the thread title omitted to say 'no tax to pay on savingsincome' and you went off on one talking as if it was supposed to be literally no tax on anything. That was perhaps a mistake by the OP, or maybe they don't care because they know what they meant ... but it is not something the government have claimed to grab votes. The government, HMRC and media have all been talking about no tax on savingsincome.

All the other posters tried to help but you are still banging on about whether or not national insurance is payable on rental income - which is well off topic but I can see that the problem arose from the definition of the topic in the thread title.

teamgb

When the new marriage/partner allowance starts(10% of partners unused personal allowance) will you be able to earn another £1060 tax free. To give a total tax free income of £16660.


£10600 + £1060 + £5000.

TCA

bowlhead99 wrote: »

You take your employment income and your rental business income and your (gross) dividend incomes first, and start paying tax on them as usual - in other words, 0% tax for the first £10600 and the normal basic rate thereafter.

If the total of that lot together is ALL under £15600 (in other words, you have used up the £10,600 personal allowance but have NOT busted all the way through the next £5000 band), you will have some of that £5000 band remaining to you, to be used on savings interest. So if you had £15000 of earnings, business income, dividends etc, that would leave £600 of 'space' in the £5000 band for you to receive interest income at the special 0% rate.

bowlhead are you sure dividends are included for this purpose? When you look at the R85 helpsheet below, it specifically says "Do not include Student Loans or Dividends for the purposes of this form":

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414637/R85_Helpsheet_150318.pdf