Personal Savings Allowance guide

Eco_Miser

Yes, most people have £11k Personal Allowance and £1k Savings Allowance, and there's £5k 0% Starting Rate for Savings if your other income is less then your PA, decreasing as other income increases. Potentially, £17k of tax-free interest. You can also have £5k of dividend income tax-free.

joe134

Eco_Miser wrote: »

Yes, most people have £11k Personal Allowance and £1k Savings Allowance, and there's £5k 0% Starting Rate for Savings if your other income is less then your PA, decreasing as other income increases. Potentially, £17k of tax-free interest. You can also have £5k of dividend income tax-free.

Hi, The £5k 0% savings rate is a tad confusing, as a lot of pensioners have tax stopped at source on their pensions, if over their personal allowance as I do, BUT, my over all income from Savings and other income;;(ie;pensions + savings interest ), is under £17k.
If the other income rises above the £11k to say £14k(,ie pensions), does the Savings allowance of £5k reduce, £1 for £1., and the tax has already been deducted at source by the pension company? Is it refunded, via R40?
Are they not seperate, not interchangable,as your PA cannot alter, just your amount of savings interest.?.

polymaff

joe134 wrote: »

If the other income rises above the £11k to say £14k(,ie pensions), does the Savings allowance of £5k reduce, £1 for £1

Yes, See:

http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9

joe134

polymaff wrote: »

Yes, See:

http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9

Thanks polymaff.
Just to clarify.
The £3k other income, £11k > £14k, taxed at source, ( pension) is (not) refundable,but, you still have another £2k Savings allowance, tax free?

polymaff

joe134 wrote: »

Thanks polymaff.
Just to clarify.
The £3k other income, £11k > £14k, taxed at source, ( pension) is (not) refundable,but, you still have another £2k Savings allowance, tax free?

Correct-ish - although, do get the terminology right. It is £2k of the Starting Rate Allowance, and it is taxed at 0%, not tax-free.

teddysmum

joe134 wrote: »

Thanks polymaff.
Just to clarify.
The £3k other income, £11k > £14k, taxed at source, ( pension) is (not) refundable,but, you still have another £2k Savings allowance, tax free?

You have to pay tax on any earnings and pension over the personal allowance limit , but as you say £ for £ is deducted from the £5000 savings interest allowance (and you also have your new extra £1000 allowance).

joe134

polymaff wrote: »

Correct-ish - although, do get the terminology right. It is £2k of the Starting Rate Allowance, and it is taxed at 0%, not tax-free.

Cheers pollymaff, it's all in the terminology.The Hmrc love it.:rotfl:
To read their literature,( not in depth), it implies one can EARN £17k without paying any tax," not so", as it's just been shown.
The PA to me is for earned income, pensions,etc, and interest is unearned income, ,as it was before they called it Savings allowance etc.
The two are separate, and one cannot be swapped for the other.
Thanks for your post, very good.:beer:

polymaff

joe134 wrote: »

To read their literature,( not in depth), it implies one can EARN £17k without paying any tax," not so", as it's just been shown.

Yes, read carefully, their statements are quite correct - but most have come away with the impression you noted. Yet another example of "tax simplification" - not.

joe134 wrote: »

The PA to me is for earned income, pensions,etc, and interest is unearned income, ,as it was before they called it Savings allowance etc.
The two are separate, and one cannot be swapped for the other.
Thanks for your post, very good.:beer:

Unearned Income? Huh - I EARNED every penny I've put into savings.

It has all got so complicated, but that model of mine seems to be quite robust, though.

Just on the issue of the PA, one misunderstanding which seems very widespread is that the Married Allowance Transfer increases the recipient's PA. It doesn't. One pound of taxable earnings over the basic PA and you are into tax, plus loss of SRA.

Tax Simplification - Sheesh!

teddysmum

But it's still not clear whether the full up to £5000 savings allowance applies, if your PA is increased by taking 10% from a spouse (ie £12100). The HMRC call centre person could not give me an answer and suggested I put the question in writing.

teddysmum

polymaff wrote: »

Just on the issue of the PA, one misunderstanding which seems very widespread is that the Married Allowance Transfer increases the recipient's PA. It doesn't. One pound of taxable earnings over the basic PA and you are into tax, plus loss of SRA.

Tax Simplification - Sheesh!

This is confusing:


There is no 'Married Allowance'. There is the Married Couple's Allowance, for older people, and the recent Marriage Allowance (not based on age) which let's the lower earner transfer 10% of their allowance, which certainly does increase the recipient's PA.