Personal Savings Allowance

scaramouch

My 65 year old wife has a State pension of £6350 per annum and has saving which will produce more interest than her Personal Savings Allowance of £1000. This however added to her pension will still be less than her Personal Allowance of £11000.

Will she still need to declare the excess interest?

In previous years we have had to fill in a Form R40 to reclaim taxed interest as all her savings were paid net and this new scheme has just complicated matters.

I would be grateful for any advice

xylophone

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

https://forums.moneysavingexpert.com/discussion/comment/70470142#Comment_70470142 - see post 7.

scaramouch

Sadly xylophone neither of the links you gave address the question that it both pension income and total savings interest received are less than the £11000 Personal Allowance, whether the amount over the £1000 new Savings Allowance has to be declared to HMRC as basically my wife could be classed as a "Non Taxpayer" or is she???

The figures are roughly Pension £6350 p.a. Interest on Savings £2300 p.a = £8650.

Does she have to pay tax on the £1300 "excess" over the Savings Allowance at what rate and what HMRC form is needed??

FOREVER21

scaramouch wrote: »

Sadly xylophone neither of the links you gave address the question that it both pension income and total savings interest received are less than the £11000 Personal Allowance, whether the amount over the £1000 new Savings Allowance has to be declared to HMRC as basically my wife could be classed as a "Non Taxpayer" or is she???

The figures are roughly Pension £6350 p.a. Interest on Savings £2300 p.a = £8650.

Does she have to pay tax on the £1300 "excess" over the Savings Allowance at what rate and what HMRC form is needed??

Hope this helps, my wife's total income is very similar to what you quote at £8250 of which £2600 is interest. She has transferred £1100 to me and her tax free personal allowance before the transfer was £11000.

As her interest is over £2500 she has to do SA, she has recently done the 2015/16 return and as she had paid tax on the NS and I 65+ bond, after inputting all the amounts she received a refund of the tax from the bond and no further tax was due.

So I think your wife is an non tax payer so her £2300 will be tax free.I would think she should declare her total interest to HMRC at year end and she might be asked to fill in a SA return, but she will not have to pay tax.

LXdaddy

If your wife has no other income than the State Pension and the interest on savings then, as the total of her income is less than £11,000 there is no tax to pay.


In fact she could have quite a bit more income and still have no tax to pay.

xylophone

From link

"The easiest way to establish if you qualify is to add up your non savings income, if it is below or within your personal allowance plus £5,000 then the Starting Rate for Savings will apply.

If this doesn’t cover all of your savings income then apply the Personal Savings Allowance. To determine which rate to use add up all of your taxable income including savings income. If it's £43,000 or less then use £1,000, if between £43,001 and £150,000, use £500."

The OP's wife has pension (ie non-savings) income of £6350 and interest of £2350.

Her personal allowance is (we assume) £11000.

Her personal allowance + £5000 = £16,000.


£6350 + £2300 = £8650.

£8650 is below £16,000.

Therefore the OP's wife's interest is wholly covered by the starting rate for savings and is tax free

saver861

xylophone wrote: »

Therefore the OP's wife's interest is wholly covered by the starting rate for savings and is tax free

That's just about the size of it.

In any event, if the Personal Allowance is £11,000 it does not matter where the income under that comes from, it won't be taxed. Thus, tax is only liable for every £1 above the £11k.

If the OP husband is paying tax then definitely it would make sense to transfer the 10% marriage allowance. Wife will then have £9,900 Personal Allowance and hubby will have £12,100 - giving him an extra £220 per year - assuming he is a tax payer.

The OP's wife could also look at taking advantage of the SIPP tax allowance and by paying in £2880 would get £720 tax relief - thus £720 for nothing. Pension income of £6350 and SIPP drawdown with 25% tax free would still keep wife under £9,900 allowance and be £720 better off per year!

kidmugsy

Normally, a woman of 65 should consider deferring her State Retirement Pension for a few years and then taking her reward as Extra Pension. I suppose an argument against that here is that she'd be deferring tax-free income but risking having her Extra Pension taxed if she were widowed early. Perhaps that argues against buying the pension top-up too. But if the OP is hale and hearty, the deferral might still be worth it: the deferrer is in profit ten years after restarting the pension.