Personal Savings Allowance guide

Dazed_and_confused

Why have you omitted the savings rate band from the middle example?

Wouldn't tax be due on £1 in that example

polymaff

polymaff wrote: »

The key point, as you say, is that once taxable non-savings income exceeds the personal allowance:

a) that excess is taxable, but notice also that,
b) you lose the excess from your starting rate allowance ...

talexuser wrote: »

Good point.

Total income 17k
made up up 11k earnings/pension, 6k of savings interest - zero tax.

Total income 17001
made up of 11k earnings/pension, 6001 of savings interest - taxable income 6001 minus 1k savings allowance - 5001 - £1000.20 tax.

Total income 17k
made up of 17k earnings/pension - £1200 tax

There's no "excess" in any of your examples, so the SRA and PSA are still fully available in all three examples you give. So in the second example, only £1 is taxed.

Try running them through my model:

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

which I might update for 2017/18 if there's sufficient interest.

talexuser

Hmmm... I'm having difficulty seeing at what point the 5k savings allowance becomes 1k without a spreadsheet.

polymaff

There are two completely independent savings allowances, so one doesn't become the other.

The Starting Rate Allowance sits on top of the Personal Allowance. It is £5k wide - but it will be sacrificed £ for £ if the taxable non-savings income exceeds the personal allowance.

The Personal Savings Allowance floats on top of the above. The only way it gets sacrificed is if the top of your income "pile" crosses your entry point to higher rate taxation - when it reduces by 50% - or when you cross your entry point into additional rate taxation - when it reduces by 100%.

Dazed_and_confused

Never.

There is a savings rate band of £5000 taxed at 0% (in 2015:16, 2016:17 and 2017:18 I think)

The personal savings allowance rate band is completely separate (£1000 taxed at 0% from 2016:17 for those not liable to higher rate tax).

People earning wages or pension over £16000 (in 2016:17) generally don't get the savings rate band just the PSA band.

People with total income (which includes some savings interest) less than £16000 benefit from the savings rate band of £5000 but will not get the PSA of £1000 (as they have no need of it)

elephantrosie

pbolding wrote: »

Can anyone advise? I have stayed just under the 40 per cent band thanks to pension contributions and charity deductions. So last year, the way HMRC puts it “your basic rate limit has been increased … to £53,000”. I have interest income of around £900. So does that mean for 2016-17 my PSA is £1000 so long as my total income including the interest is under the increased basic rate limit? Or am I missing something?

hello there. please would you teach us how to maximise your interest income to 900 quids this year?

elephantrosie

hello guys, I am a high rate taxpayer and want to be careful not to exceed the 500 pounds yearly allowance.

i have the following accounts (in brackets refer to annual interest income):
HSBC regular saver 81.25
TSB regular saver 28.38
nationwide regular saver 161.29

i also have a nationwide current account, but i am not sure how to calculate the interest income. if i put 2500 in it throughout the year, with 5% interest rate, what is my annual interest income from this account?

thanks all.

Eco_Miser

elephantrosie wrote: »

hello there. please would you teach us how to maximise your interest income to 900 quids this year?

£90,000 in a 1% account would do it, utilising the 3% and 5% accounts would mean less capital would be required.

elephantrosie wrote: »

i also have a nationwide current account, but i am not sure how to calculate the interest income. if i put 2500 in it throughout the year, with 5% interest rate, what is my annual interest income from this account?

Gross annual rate (4.89%) times principal(£2500) =£122.25

talexuser

polymaff wrote: »

There are two completely independent savings allowances, so one doesn't become the other.

Thanks, that's where I was going wrong.

elephantrosie

Eco_Miser wrote: »

£90,000 in a 1% account would do it, utilising the 3% and 5% accounts would mean less capital would be required.

Gross annual rate (4.89%) times principal(£2500) =£122.25

Thanks!

i wish i learnt about finance back in school.
all those x+y=z in additional maths were useless in real life!