Personal Savings Allowance guide

colsten

young_pensioner wrote: »

When they became available, I invested in the pensioner 65+ bonds. They are supposed to be tax-free, but from what I understand I will need to apply for the a refund of the tax, since it will have been deducted at source. Will the new interest allowance change the need to reclaim? Will it simply be paid gross?

Pensioner Bonds were never supposed to be tax free, and in 2015-16, interest gets paid after 20% tax. You personally might not have to pay tax as your total income might be below the treshold at which tax becomes payable, and you are right, for 2015-16, you will have to to request a tax refund by filling in HMRC form R40.

From 2016-17 onwards, NS&I should be paying all interest gross for the Pensioner Bonds but you need to confirm this against their T&Cs which may or may not already have been updated.

tindella

you will pay more than 20% if your total income (work + non-ISA savings) will be some £31,900 after personal allowance (£11,000).



Thanks for your help so far, Colsten


I earn about £7K per year on top of my £11K pensions so, obviously I pay 20p in the £1 on my £7K. Now I do have savings above £31,900 but I've already paid tax on those when I earned the money! Do you mean I'll just pay tax on the interest I get above £1000 (which is fair) - so how do they decide how to do this? Do I pay my normal 20p tax on my earnings, and then get a bill for the tax they haven't taken over the £1000? So if they've given me, for instance £2000 interest, will I just have the "over allowance" deducted from any earnings I might have? Sounds like I'll be out of pocket by earning a living and being prudent!

JANE_JACKSON

I'm new to this site so I apologise in advance if I've got it wrong. I am a non tax payer earning just over £9,000 per year but have quite a lot in savings. Can anyone tell me how I would pay the tax on interest on savings in excess of £1,000?

ceredigion

JANE_JACKSON wrote: »

I'm new to this site so I apologise in advance if I've got it wrong. I am a non tax payer earning just over £9,000 per year but have quite a lot in savings. Can anyone tell me how I would pay the tax on interest on savings in excess of £1,000?

You'll have no tax to pay,


edit; you shouldn`t be paying any now.

colsten

tindella wrote: »

11K pensions so, obviously I pay 20p in the £1 on my £7K. Now I do have savings above £31,900 but I've already paid tax on those when I earned the money! you do not pay tax on your balance - we have no wealth tax in the UK! (and hopefully JC will never get his hands on the tiller to introduce one) Do you mean I'll just pay tax on the interest I get above £1000 (which is fair) - YES so how do they decide how to do this?

tindella wrote: »

Do I pay my normal 20p tax on my earnings, and then get a bill for the tax they haven't taken over the £1000? So if they've given me, for instance £2000 interest, will I just have the "over allowance" deducted from any earnings I might have?

With the figures you have quoted, you are likely to benefit from the "starting tax rate", on top of the £1,000 Personal Savings Allowance. You won't be liable to paying any tax on your 2016-17 interest for a considerable time yet - watch out for further details a few months down the line on how HMRC process this. In the meantime, hang on to this important fact:
If your total taxable income in 2016-17 is less than £17,000 you won’t pay tax on any savings income.

tindella wrote: »

Sounds like I'll be out of pocket by earning a living and being prudent!

there is no reason to think you'd be out of pocket on any tax that might be due on your savings

tindella

Many thanks for all your help, Colsten - I shall bear all your advice in mind!

Spidernick

For those of you affected, please note that the Child Benefit claw back includes the amount of any interest (and indeed dividend income) BEFORE the new allowances.

Also note that, should your investment income that would otherwise be tax free, trip you into the 40% tax band, then you get the reduced £500 allowance, even if ultimately you don't end up having to pay higher-rate tax.

nnamak

Am I right in understanding that if you have over £1000 in savings interest, your bank/BS/etc. will contact HMRC with the figures, and your 'personal allowance' will be adjusted, i.e. your tax code.

BUT, if you have several savings accounts with different institutions and, let's say, each one pays £900 interest, then none of those institutions would be contacting HMRC - right? So you could be accumulating way over the £1000 when adding together the various accounts' interest, but HMRC wouldn't be aware - right?

Could this be a savers 'Google/Starbucks/et al' moment?

masonic

nnamak wrote: »

Am I right in understanding that if you have over £1000 in savings interest, your bank/BS/etc. will contact HMRC with the figures, and your 'personal allowance' will be adjusted, i.e. your tax code.

BUT, if you have several savings accounts with different institutions and, let's say, each one pays £900 interest, then none of those institutions would be contacting HMRC - right? So you could be accumulating way over the £1000 when adding together the various accounts' interest, but HMRC wouldn't be aware - right?

Could this be a savers 'Google/Starbucks/et al' moment?

I think it has been made pretty clear that HMRC will have view of all of your savings income, not just lumps that would consume a whole personal savings allowance. In any case, some people will have a PSA of £500 and others will have none at all. On top of that, it will be your responsibility to ensure you pay the right amount of tax, just as it is right now.

Archi_Bald

nnamak wrote: »

Am I right in understanding that if you have over £1000 in savings interest, your bank/BS/etc. will contact HMRC with the figures

All the interest you earn has been reported to HMRC for some time, refer to European Savings Directive for further detail if you need it.

It's probably not the smartest of ideas to think of some cunning plan on how to avoid paying any tax you might owe on your savings interest.