Tax on savings 2016-2017 I.T.Y

henriklarsson

Been a long time since I've posted but I have a query on the new allowance on tax on savings in the forthcoming tax year. I've posted an example that pretty well relates to my situation and how I see it in the new tax year. It looks to me that despite many savers not paying tax on their savings interest I am actually going to pay more. Please advise me if I have misread the current and future situations.
I am a pensioner with total income(excluding savings interest) of £13600 per annum.Tax is then due on £3000-£13600 less £10600 p.a, an amount of £600
I then have £2000(£15600-£13600) of savings interest tax free. My savings interest(excluding ISA's) in the tax year totals £6000 so I'm liable for tax on £4000 (£6K-£2K)- a sum of £800.
Total tax payable is £1400.
I don't expect the interest earned in the new tax year to be any less and see my situation as follows-some assumptions being made. Income rises by say 2% to £13872. Personal Allowance rises to £11000 so tax due on £2872 is £574.40. The first £1000 of my £6000 interest is tax free so I will pay tax at 20% on £5000 interest- sum of £1000. Total tax in the 16/17 ITY of £1574.40.

I would agree that I'm in a fortunate position in having so much paid in interest but it strikes me as a bit odd that with the introduction of these new measures I find myself as a pensioner likely to be paying more.

Have I misunderstood the existing and new measures?

HappyHarry

You will be better off.

You have missed the fact that the starting rate limit (savings income) will remain at £5,000.

This is in addition to the new tax-free amount of £1,000 of savings income.

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2016-17/tax-and-tax-credit-rates-and-thresholds-for-2016-17