2016 no tax on first £1000 interest earned

chris_m

gadgetmind wrote: »

Originally Posted by steve65e
More here...
http://www.moneysavingexpert.com/savings/personal-savings-allowance

Edited to not have the double http.

Edited to not have the double http in the underlying link too

chris_m

colsten wrote: »

I have no idea where the £2K comes from, there is nothing I have seen in any HMRC document about it.
Here is what I understand

2016-17

• everyone has a personal allowance
• people on low income also have a "starting rate" for savings income. Where, for 2016-17
  1. low income is defined as personal allowance plus £5,000, i.e. £15,800
  2. the starting rate is 0%
• a new savings tax allowance will apply as follows:
  1. £1,000 for BR tax payers
  2. £500 for HR tax payers
  3. none for additional rate tax payers

My understanding is supported by this government document in which it says

That means from April 2016, you won’t have to pay tax on your interest if your taxable income is less than £16,800.

There is absolutely nothing that suggests the starting tax rate would get abolished in 2016-17.

That's my understanding, one of the documents I referred to earlier was the one you've linked.

So, either we are both wrong, or MSE is wrong in this article;
http://www.moneysavingexpert.com/savings/tax-free-savings

or HMRC haven't made their minds up so it's anybody's guess

gadgetmind

chris_m wrote: »

Edited to not have the double http in the underlying link too

Thanks, I'll delete my message.

gadgetmind

How does this work with the new £5k dividend allowance?

Could someone use their personal allowance for their pension income, then have £5k interest on this as they are low pain, and use their £5k dividend allowance and £11k CGT allowance?

Also, does interest on bonds count as interest for the £5k/£1k or is it only bank interest?

molerat

chris_m wrote: »

That's my understanding, one of the documents I referred to earlier was the one you've linked.

So, either we are both wrong, or MSE is wrong in this article;
http://www.moneysavingexpert.com/savings/tax-free-savings

or HMRC haven't made their minds up so it's anybody's guess

MSE journalism wrong ........... never :eek:

chris_m

gadgetmind wrote: »

How does this work with the new £5k dividend allowance?
Could someone use their personal allowance for their pension income, then have £5k interest on this as they are low pain, and use their £5k dividend allowance?

I think that the new dividend tax only applies to taxpayers, so someone earning (or getting a pension) below the income tax personal allowance would not be due to pay any divvie tax. If that understanding is correct then your second paragraph would be correct - I certainly hope so because divvies and interest are intended to be a handy boost to my pension, tax free even more so

Again, I haven't been able to find anything definitive but a Torygraph article I found implied that the dividend allowance would be on top of the savings tax allowance - although it only included the £1K allowance for all, not the £5K for lower income people.

(I've taken out the CGT part of your question because that is completely separate anyway)

jem16

chris_m wrote: »

I think that the new dividend tax only applies to taxpayers, so someone earning (or getting a pension) below the income tax personal allowance would not be due to pay any divvie tax.

I don't think that's the case as dividend payments will still count as taxable income.

An example from HMRC;

Example 3

“I have a non-dividend income of £6,500, and a dividend income of £12,000 from shares outside of an ISA”

With a Personal Allowance of £11,000, £4,500 of the dividends are under the threshold for tax. A further £5,000 comes within the Dividend Allowance, leaving tax to pay at Basic Rate (7.5%) on £2,500.

So as far as gadgetmind is concerned, there will be the PA, the Dividend Allowance and the savings Allowance applied appropriately.

chris_m

jem16 wrote: »

I don't think that's the case as dividend payments will still count as taxable income.

Rats
.

steve65e

[/QUOTE]My understanding is supported by this government document in which it says



There is absolutely nothing that suggests the starting tax rate would get abolished in 2016-17.[/QUOTE]

Thanks for that. It's a new document which supercedes the links in the MSE articles I (and others) referred to. It seems pretty clear to me.

KGriff

Spanishsunawaits wrote: »

I understand that from April 2016 you can earn interest up to £1000 without having to pay tax on it. How will this work? Who tells the banks/building societies etc to not take tax from my gross interest?

How will the tax office know? Who adds up the £1000?

I just don't understand how it will work and there doesn't seem to be much in the press or information about it.

Thanks

My thoughts were that the banks etc. were all no longer going to collect any interest on savings at all and that it was down to each individual to declare any tax owed at the end of the financial year.

So a 20% basic rate tax payer (earning up-to £43,000) who receives £1,000 or less, in savings interest, has nothing to declare.

A 40% tax payer (earning £43,000 and below £150,000) is allowed to receive £500 in savings interest before having to declare anything.

And those with a higher income (earning above £150,000), pay tax on all their savings, unless sheltered inside an ISA etc.

There is also the 'existing' £5,000 allowance for anyone earning anything below next years personal allowance of £11,000 ... This allowance itself though decreases, 'pound for pound', as the income part only increases (so savings interest not included in the total) and their earnings move towards £16,000 (i.e. Personal allowance plus £5,000 is technically the max allowance, but the new £1,000 allowance would apply to all in this case and now be added on top of that existing allowance.)

So in simple terms a person with an exact annual income of £11,000 would have savings interest allowances totalling £6,000 and no tax at all to pay on their income.

A person with an exact annual income of £11,500 would have savings interest allowances totalling £5,500 but will pay basic rate tax on £500 of their income.

And so on and so forth

A person with an annual income between £16,000 and £43,000 would have the new savings interest allowance only, totalling £1,000, but will pay basic rate tax on their earnings over £11,000 of their income.

I think that is the aim of the changes in April.