2016 no tax on first £1000 interest earned

Archi_Bald

bigfreddiel wrote: »

next year it will obviously be £16k.

It will actually be £16,800 (unless chopped in the autumn budget) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414026/Savings_factographic_final.pdf

planteria

cheap-information wrote: »

I would have thought everyone will get the interest tax free from now on and if you earn more than the amount you will have to declare it on your tax return.

is this how it is going to be from April onwards:question:

Archi_Bald

planteria wrote: »

is this how it is going to be from April onwards:question:

Essentially yes, although no details have been announced yet.

I don't expect that you need to pay any tax on savings before the end of the tax year 2016-17 because you can argue you don't know what your taxable income is until the tax year is over.

But I am sure that if you really want to pay tax earlier, you can ask the HMRC to take extra money off you (e.g. by adjusting your tax code).

planteria

thanks Archi... it will be nice to get started with the new system

bigfreddiel

I always do a tax return, and I'm a basic rate taxpayer.

And every year I get a substantial rebate.

When I retired it became even more important to do as I have more than one income.

Just keep records, label them with the section numbers on the form, use a spreadsheet, and your tax return will take 5 minutes, any longer than that then you're doing something wrong.

Cheers fj

Nuffpaid

Hi, have tried to read all I can re this subject but I am still somewhat confused with the following aspect.
If your combined earnings of salary and income place you in the higher tax bracket, (40%), do you then pay the higher rate on the lot or just your interest.

zagfles

Nuffpaid wrote: »

Hi, have tried to read all I can re this subject but I am still somewhat confused with the following aspect.
If your combined earnings of salary and income place you in the higher tax bracket, (40%), do you then pay the higher rate on the lot or just your interest.

You pay higher rate on the amount that's in the higher rate band. Except for the first £500 interest which is tax free.

Nuffpaid

Zagfles, thank you for your reply, I am however still not sure I understand.
If I earn £42,000 salary and interest of £2000 this would place me in the 40% tax bracket at £44,000 income.
Do you then have to pay 40% tax on all £44,000 or are you charged tax at 40% on the portion of interest that placed you in the 40% bracket?
In my mind there is a big difference!

Hope that makes sense.

bigfreddiel

Nuffpaid wrote: »

Zagfles, thank you for your reply, I am however still not sure I understand.
If I earn £42,000 salary and interest of £2000 this would place me in the 40% tax bracket at £44,000 income.
Do you then have to pay 40% tax on all £44,000 or are you charged tax at 40% on the portion of interest that placed you in the 40% bracket?
In my mind there is a big difference!

Hope that makes sense.

If you earn £44k regardless of where it comes from you do not pay 40% on all of it.

You only pay 40% on the chunk above the basic rate.

Simple isn't it?

Cheers fj

masonic

Nuffpaid wrote: »

Zagfles, thank you for your reply, I am however still not sure I understand.
If I earn £42,000 salary and interest of £2000 this would place me in the 40% tax bracket at £44,000 income.
Do you then have to pay 40% tax on all £44,000 or are you charged tax at 40% on the portion of interest that placed you in the 40% bracket?
In my mind there is a big difference!

Zagfles has already mentioned that it's "the amount that's in the higher rate band" (i.e. not all of it)