new tax law

Grace_Beyler

My husband and I do pay income tax as our individual incomes do not exceed £11,000 per annum. That said, our income from savings accounts exceeds the new £1000 limit. Are we subject to tax on this interest even if we do not have income which exceeds the personal allowances? also - if we are liable to pay tax, is it on the whole amount of interest or just on that which is over the limit?

polymaff

Grace_Beyler wrote: »

My husband and I do pay income tax as our individual incomes do not exceed £11,000 per annum. That said, our income from savings accounts exceeds the new £1000 limit. Are we subject to tax on this interest even if we do not have income which exceeds the personal allowances? also - if we are liable to pay tax, is it on the whole amount of interest or just on that which is over the limit?

Here's a simple, visual, model of 2016/17:.

Draw a, to-scale, column representing your taxable income. The top part of the column is any dividend income, the middle part is any taxable savings income, and the bottom part is any other taxable income (e.g. earnings, pensions).

Now draw lines across the column at £11,000, £16,000 and £43,000.

The following statements apply, in the order given:-

Anything below the £11,000 line is taxed at 0%.

Any taxable savings income below the £16,000 line is taxed at 0%.

If the total column exceeds the £43,000 line then up to a further £500 of taxable savings income is taxed at 0%. If the column doesn't exceed the £43,000 line then make that £500 of taxable savings income £1,000.

The first £5,000 of dividend income above the £11,000 line is taxed at 0%.

What is left is taxable - below the £43,000 line at basic rate, above at higher rate.
_____

Draw the column and then, I suggest, shade in the bits that my statements say will be taxed at 0%. You may be in for a pleasant surprise.

xylophone

See http://www.taxvol.org.uk/about-tax/entitled-10-band-savings-interest/

darkidoe

polymaff wrote: »

Here's a simple, visual, model of 2016/17:.

Draw a, to-scale, column representing your taxable income. The top part of the column is any dividend income, the middle part is any taxable savings income, and the bottom part is any other taxable income (e.g. earnings, pensions).

Now draw lines across the column at £11,000, £16,000 and £43,000.

The following statements apply, in the order given:-

Anything below the £11,000 line is taxed at 0%.

Any taxable savings income below the £16,000 line is taxed at 0%.

If the total column exceeds the £43,000 line then up to a further £500 of taxable savings income is taxed at 0%. If the column doesn't exceed the £43,000 line then make that £500 of taxable savings income £1,000.

The first £5,000 of dividend income above the £11,000 line is taxed at 0%.

What is left is taxable - below the £43,000 line at basic rate, above at higher rate.
_____

Draw the column and then, I suggest, shade in the bits that my statements say will be taxed at 0%. You may be in for a pleasant surprise.

Simple and Clear. The HMRC should hire you to explain the new tax regime.

fifeken

Grace_Beyler wrote: »

Are we subject to tax on this interest even if we do not have income which exceeds the personal allowances?

No, you're not.

polymaff

darkidoe wrote: »

Simple and Clear. The HMRC should hire you to explain the new tax regime.

Indeed they should!

I'm not holding my breath, though. :rotfl:

Grace_Beyler

Thanks to you all! I knew the answer would be simple - but just try to find out through the usual channels!

oldfella

if your total taxable income is less than £17000 there is no tax to pay. You need to add the new £1000 to the £16000

polymaff

oldfella wrote: »

if your total taxable income is less than £17000 there is no tax to pay. You need to add the new £1000 to the £16000

Not so. MSE is at present awash with such incorrect statements.

Consider someone with a £15,000 pension, no taxable savings income and no dividend income. Your statement falls over completely. Let's try to get it right.

oldfella

slight rework then, if your earned income is £11K you can enjoy £6K tax free of savings income, is that OK ?

teddysmum

polymaff wrote: »

Not so. MSE is at present awash with such incorrect statements.

Consider someone with a £15,000 pension, no taxable savings income and no dividend income. Your statement falls over completely. Let's try to get it right.

oldfella's statement is true for the OP who states that she and her husband have less than £11000 income, which is not from savings,but not true for someone having income (pension and earnings) over £11000,as tax has to be paid on the excess non-savings income over £11000.