Personal Savings Allowance guide

Sadsaver

colsten wrote: »

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.

Many thanks to Colsten & Eco Miser for your kind clarification. I think that i have finally got my meagre brain round this conundrum! It seems to have plenty of potential for numerous 'cockup's' by HMRC, & will probably cause them more of a headache than they thought, with their nee 'simplifying the Tax system' philosophy!

masonic

gazza007 wrote: »

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

That's right. We all have the right to our opinions and we also have the right to express them. If we choose to exercise our right to express our opinions to others, then they have the right to criticise them... because that criticism is their opinion, which they have the right to express. Etc, etc.

justretiredyorkie

Hi.

Can you please let me know what the position will be with Fixed Term Bonds.

For example, I am retired, and a basic rate tax payer, I have bonds for a 3 year period which mature in 2019, but I do actually not have access to this money until then. The interest which these bonds accrue will be on an annual basis, but the interest will not actually be paid to me until 2019, although earned over a 3 year period,.

Wlll the HRMC, allow my personal savings annual to be spread over this 3 year period, will this be taken into account, or will the money paid to me in year 3 be taxed as if all the interest was earned in 2018/2019 tax year.?, as this makes significant difference if there is tax to pay.

Eco_Miser

justretiredyorkie wrote: »

For example, I am retired, and a basic rate tax payer, I have bonds for a 3 year period which mature in 2019, but I do actually not have access to this money until then. The interest which these bonds accrue will be on an annual basis, but the interest will not actually be paid to me until 2019, although earned over a 3 year period,.

Your interest is taxable in the year it is added to your account, so in each of the three years in your case.
Each year, if your total interest, including that year's portion of the bond interest is under £1000 (£500) you will pay no tax on it.

I believe there are some fixed term bonds that pay all the interest on maturity, this can be beneficial to higher rate payers who expect to be on a lower rate at that time.

justretiredyorkie

Thanks for that Eco Miser.

So if I did exceed my personal savings allowance of £1,000 in my first year of the 3 years, I will pay tax on that, accrued interest at the of the first year, irrespective of the fact that that I won't actually receive the interest until the end of the 3rd year.

bowlhead99

If the interest is credited *to your account* at end of year one, even if it can't be physically paid out of that account and credited to *you*, it is still taxable. But at least your account would have more money in it than your initial contribution of the deposit, because of the interest "received" so the returns would start to compound.

xylophone

Tax is due when the interest is added to the account, regardless of when it is paid out to you.

If this is in the tax year 16-17, and is over £1000, or your total interest over all savings is over £1000, then you will need to advise HMRC unless your total income, including savings income, is less than £17,000 per annum- see

http://www.taxvol.org.uk/about-tax/tax-rates-apply/

Eco_Miser

justretiredyorkie wrote: »

So if I did exceed my personal savings allowance of £1,000 in my first year of the 3 years, I will pay tax on that, accrued interest at the of the first year, irrespective of the fact that that I won't actually receive the interest until the end of the 3rd year.

Yes, except that you do receive the interest, and keep it in the bond for another two years earning even more interest at the three year rate, not the two year rate.

DudleyPaul

The way I understand this then low income savers are worse off in 2016-17 than they were in 2015-16. Am I right in thinking that in 2015-16 the savings allowance was £5000 but in 2016-16 this has been reduced to £1000? If so that means we are potentially 20% of £4k worse off (i.e. £800)

LXdaddy

DudleyPaul wrote: »

The way I understand this then low income savers are worse off in 2016-17 than they were in 2015-16. Am I right in thinking that in 2015-16 the savings allowance was £5000 but in 2016-16 this has been reduced to £1000? If so that means we are potentially 20% of £4k worse off (i.e. £800)

No the old £5,000 allowance for those with low earnings will still be there. They also benefit from the new £1,000 Personal Savings Allowance.