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Personal Savings Allowance guide

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  • masonic wrote: »
    As a retired dustman, your other income remains taxable, so why should your interest income be any different? Many pensioners are taxpayers, even taking interest aside.

    as a retired dustman, most of your income over your lifetime will be from employment, very little from interest.

    we have a tax system in which income from employment is more heavily taxed than any other kind of income. this is directly contrary to your interests. if all kinds of income were taxed in the same way, the rate of tax on earned income could be a little bit lower.

    so you seem defending a system which is contrary to your own interests - and also unfair.
  • masonic
    masonic Posts: 27,282
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 15 February 2016 at 7:19AM
    as a retired dustman, most of your income over your lifetime will be from employment, very little from interest.

    we have a tax system in which income from employment is more heavily taxed than any other kind of income. this is directly contrary to your interests. if all kinds of income were taxed in the same way, the rate of tax on earned income could be a little bit lower.

    so you seem defending a system which is contrary to your own interests - and also unfair.
    The position I am disagreeing with is that tax on interest should be zero. I'd be quite comfortable if, as you suggest, it were higher than it is now, with tax on earned income lower. The corollary of your point above is that if taxation of savings interest were to be abolished as gazza suggests above, tax on earned income would have to be increased - that would make things even more unfair than under the present system.

    Edit: and just FYI, it was gazza who had assumed the role of retired dustman in this discussion, not me.
  • sorry, i was unclear there ... my comments were supposed to be directed at gazza (as the retired dustman) ... i quoted masonic's post because i agreed with it, and my argument was meant to follow on from it.
  • Bottom line is that we are entitled to express our personal opinions whether we agree with each other or not.
    About 6 years ago George Osborne promised to simplify the UK tax system including things like merging of Income Tax & NI contributions. TBH it has got worse and IMHO the I can see PSA system not going ahead or being abandoned. What is next? abolish PAYE and we all have to self assess.
  • I recently received by new tax codes spread between my small pension and small part-time job. HMRC assumed I was going to earn £5k in interest so reduced my tax codes meaning I would be £80 a month worse off. I won't get nowhere near £5k interest this year due to house purchase and reduced interest rates but will probably get more than £1K. I phoned HMRC to explain and they took off the £5k interest and told me just to keep a note of my gross interest throughout the year and then phone it into them. They will then send me a Notice of Unpaid Tax and I can settle up. They weren't sure whether this could be in a lump sum or by reducing my tax code for 2017-8. Either way it's much better than having my take home pay reduced as most of my savings are in long term accounts which I cannot access easily.
  • gazza007 wrote: »
    Bottom line is that we are entitled to express our personal opinions whether we agree with each other or not.
    About 6 years ago George Osborne promised to simplify the UK tax system including things like merging of Income Tax & NI contributions. TBH it has got worse and IMHO the I can see PSA system not going ahead or being abandoned. What is next? abolish PAYE and we all have to self assess.
    The introduction of the PSA will make it simpler for the vast majority of people. The majority of people have less than £2,000 in savings. Those who will have a tax liability from savings interest going forward are very much in the minority and there will always be winners and losers from any change. Personally, I'm inconvenienced by the current system because I receive untaxed interest that I need to declare and I do not self assess. I'm looking forward to seeing what the personal tax account can do to make this easier for me. Nobody knows exactly what will be required of those people who have a tax liability in the next tax year, so it is premature to state things have got worse for anyone.
  • Right...Just to finally get my head round this!!
    With the abolition of the 10p rate on savings, and the new 'Personal Allowance' of £16,800 in the 2016-17 tax year.....
    If for arguments sake, you earn a total of £15,800 in earned income in a pension.....Am I right in assuming that in effect you would have a tax free allowance of £2000 on savings interest, in the 2016-17 tax year?
    My assumption is based on the £1,000 difference between £15,800 earned income and the £16,800 'personal allowance', and the £,1000 allowance on interest on savings Tax, on top of that allowance.
    Or is the 'ceiling' £16,800 with the £1,000 included in that amount.
    Please could someone clarify for me...
    Thanks
  • colsten
    colsten Posts: 17,597 Forumite
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    Sadsaver wrote: »
    My assumption is based on the £1,000 difference between £15,800 earned income and the £16,800 'personal allowance', and the £,1000 allowance on interest on savings Tax, on top of that allowance.

    Personal allowance next tax year will be £11,000.
    0% starting tax rate on savings is on max £5,000.
    Personal savings allowance will be £1,000.
  • Eco_Miser
    Eco_Miser Posts: 4,856 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 16 February 2016 at 2:08PM
    Sadsaver wrote: »
    If for arguments sake, you earn a total of £15,800 in earned income in a pension.....Am I right in assuming that in effect you would have a tax free allowance of £2000 on savings interest, in the 2016-17 tax year?
    The £15,800 pension would take all £11,000 PA and £4800 of the starting tax rate on savings, (but it's not savings, so you'd have to pay £960 tax on that), so you could have £1200 savings interest tax-free.
    Eco Miser
    Saving money for well over half a century
  • gazza007
    gazza007 Posts: 248 Forumite
    masonic wrote: »
    The introduction of the PSA will make it simpler for the vast majority of people. The majority of people have less than £2,000 in savings. Those who will have a tax liability from savings interest going forward are very much in the minority and there will always be winners and losers from any change. Personally, I'm inconvenienced by the current system because I receive untaxed interest that I need to declare and I do not self assess. I'm looking forward to seeing what the personal tax account can do to make this easier for me. Nobody knows exactly what will be required of those people who have a tax liability in the next tax year, so it is premature to state things have got worse for anyone.

    Like I said earlier you are entitled to your own personal opinion
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