The new personal savings allowance means some will be better off earning LESS interes

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.




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  • VT82VT82 Forumite
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    Haha gotta love Martin's brain at coming up with this stuff. Right up my street doing weird and wonderful scenario analysis to identify anomalies. Like being back at school.

    Of course seeing as there's no way someone earning £42k plus £1k in savings interest is going to have to complete a tax return (assuming PAYE tax), it's never going to be an issue, but still enjoy the maths :beer:
  • iv got one house i rent out & can i still put the money in to an isa and would this effect me from putting money in to a normal savings account or would i be better off just putting it in to my isa
  • beefturnmailbeefturnmail Forumite
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    Am I right in thinking that, following the changes, interest earned within the PSA will NOT count as income when assessing for the High Income Child Benefit tax charge (becasue it is not taxable)?
  • edited 26 February 2016 at 5:23AM
    jamesdjamesd Forumite
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    edited 26 February 2016 at 5:23AM
    [STRIKE]Looks as though Marting and MSE can usefully do more of a FAQ to cover some if the things people are posting about.[/STRIKE]
    VT82 wrote: »
    Of course seeing as there's no way someone earning £42k plus £1k in savings interest is going to have to complete a tax return (assuming PAYE tax), it's never going to be an issue
    A person with tax to pay is required by law to inform HMRC. Banks and other institutions are obliged by law to inform HMRC about interest earned and HMRC is to use this to pre-populate the information in people's Personal Tax Accounts (those are available already but not yet with this information, everyone has one). So HMRC will just change your PAYE or pension tax code or get in touch if you fail to act as required.
    Am I right in thinking that, following the changes, interest earned within the PSA will NOT count as income when assessing for the High Income Child Benefit tax charge (becasue it is not taxable)?
    The savings interest is taxable income, just like savings earned within the normal income tax personal allowance. Just nil tax to pay on it while within the range. I don't know whether there's some specific rule about this and the High Income Child Benefit tax charge. Pension contributions are usually the best way to avoid that.
    bigmc wrote: »
    iv got one house i rent out & can i still put the money in to an isa and would this effect me from putting money in to a normal savings account or would i be better off just putting it in to my isa
    Normally, just pick the best interest rate after tax effects. That's the easy and correct rule for people with savings that are no more or only a little more than the annual ISA contribution limit. For more on this see Martin's blog entry Is it time to ditch cash ISAs – now that all savings will be tax-free? Those with larger amounts of savings can be better off doing other things if they think about long term planning or play the system with a new Flexible ISA once those can become available from April..
  • MSE_MartinMSE_Martin MoneySaving Expert
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    VT82 wrote: »
    Haha gotta love Martin's brain at coming up with this stuff. Right up my street doing weird and wonderful scenario analysis to identify anomalies. Like being back at school.

    Of course seeing as there's no way someone earning £42k plus £1k in savings interest is going to have to complete a tax return (assuming PAYE tax), it's never going to be an issue, but still enjoy the maths :beer:

    Thank you :money:

    Not true according to HMRC though. The banks will report interest to it and it will change tax code - so lack of self assesment doesn't mean this won't happen
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.
    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
  • MSE_MartinMSE_Martin MoneySaving Expert
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    jamesd wrote: »
    Looks as though Marting and MSE can usefully do more of a FAQ to cover some if the things people are posting about.

    James, we have, this is just my blog on the anomaly. The full PSA guide is here.. http://www.moneysavingexpert.com/savings/personal-savings-allowance?_ga=1.53786536.10764426.1453824159 :)
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.
    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
  • jamesdjamesd Forumite
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    Thanks. Naughty posters for not checking and naughty me poster for not checking as well. :)
  • edited 2 March 2016 at 3:27PM
    cepheuscepheus
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    edited 2 March 2016 at 3:27PM
    I think low earners have been able to obtain £5000 of tax free savings interest since the last budget. Presumably this will continue.
    From April 2015 the starting rate of savings income tax will become 0% and the amount of savings income that the rate applies to will increase from £2,880 to £5,000. This will mean that anyone with a total income (including wage, pension, benefits and savings income) of less than £15,500 – your personal allowance at the 2015 £10,500 rate, plus £5000 - will not pay any tax on their savings, however, you must register for this by filling out an R40 form.

    http://moneyfacts.co.uk/news/savings/savers-helped-by-budget-2014/
  • nnamaknnamak Forumite
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    So, are we expected to contact HMRC if we have several interest amounts which, individually are below £1000 but collectively are above £1000?
  • zagfleszagfles Forumite
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    As I mentioned in another thread, if you do accidently go just over the limit, and don't realise till after the end of the tax year, you can make a gift aid contribution and backdate it.

    So in "scenario 2", contribute £8 to your favourite charity using gift aid. Gross contribution of £10 will extend your basic rate band by £10 and so you'll still be a basic rate taxpayer. You can backdate gift aid on your tax return for gifts made between the end of the tax year and when you fill in your tax return.
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