Income <12K, Interest >12K

buyhighselllow

Hi
I should be under the 40% tax threshold this year just about. My wife earns under 12K and we keep a larger proportion of our taxable savings in her name..For the 1st time it is possible she may earn over £1000 in interest..so would she have to pay 20% on this excess or is there a form/ someway to register that she is earning under 12K and this be able to earn all interest tax free ? Alternative is I redirect some into my name but would like clarification of how lower earners stand on this

molerat

If her total income including interest is less than £17.5K then no tax to pay on the interest.
https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance
https://www.gov.uk/apply-tax-free-interest-on-savings

Dazed_and_confused

Presumably you mean no tax to pay on the interest

buyhighselllow

molerat wrote: »

If her total income including interest is less than £17.5K then no tax to pay.
https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance
https://www.gov.uk/apply-tax-free-interest-on-savings

Thanks for this

buyhighselllow

Dazed_and_confused wrote: »

Presumably you mean no tax to pay on the interest

yes thats right

Dazed_and_confused

Don't really understand this

or is there a form/ someway to register that she is earning under 12K and this be able to earn all interest tax free ?

Either the relevance of 12k or why you wouldn't have to pay tax if you earned say £10k and had £500k in interest??

buyhighselllow

Dazed_and_confused wrote: »

Don't really understand this

or is there a form/ someway to register that she is earning under 12K and this be able to earn all interest tax free ?

Either the relevance of 12k or why you wouldn't have to pay tax if you earned say £10k and had £500k in interest??

I wrongly assumed the tax free income allowance was 12K before one had to pay tax on earn't interest over £1000. It appears to be 17K. Anyway, my wife clearly can earn over £1000 in interest and not be taxed at the basic rate on it...I was basically wandering if you had to notify anyone that you were not liable to be taxed on interest over £1000...

TheCyclingProgrammer

buyhighselllow wrote: »

.I was basically wandering if you had to notify anyone that you were not liable to be taxed on interest over £1000...

You're only obliged to notify HMRC if you are chargeable to tax, so if you're satisfied no tax is due, you have nothing further to do.

polymaff

buyhighselllow wrote: »

Hi
I should be under the 40% tax threshold this year just about. My wife earns under 12K and we keep a larger proportion of our taxable savings in her name..For the 1st time it is possible she may earn over £1000 in interest..so would she have to pay 20% on this excess or is there a form/ someway to register that she is earning under 12K and this be able to earn all interest tax free ? Alternative is I redirect some into my name but would like clarification of how lower earners stand on this

buyhighselllow wrote: »

I wrongly assumed the tax free income allowance was 12K before one had to pay tax on earn't interest over £1000. It appears to be 17K. Anyway, my wife clearly can earn over £1000 in interest and not be taxed at the basic rate on it.

This assumes we are talking 2016/17 and - to keep it simple - that you're not a higher rate tax payer. (and that you understand the rather arcane definition of who is a higher rate tax payer!).

Draw a, to-scale, column representing your taxable gross income. The lower part of the column should be your taxable non-savings income (earnings, pensions, etc); next up the column should be your taxable savings income; the top part should be your dividend income. Total up your Personal Allowances - usually £11,000 - and put a tick that far up from the bottom of the column.

All income below, plus the first £6,000 of taxable savings income above, the tick will be taxed at 0%.

While you're being MSE, your wife might also like to apply for the Marriage Allowance Transfer. With the data you quote it sounds as though you (plural) would benefit.

buyhighselllow

polymaff wrote: »

This assumes we are talking 2016/17 and - to keep it simple - that you're not a higher rate tax payer. (and that you understand the rather arcane definition of who is a higher rate tax payer!).

Draw a, to-scale, column representing your taxable gross income. The lower part of the column should be your taxable non-savings income (earnings, pensions, etc); next up the column should be your taxable savings income; the top part should be your dividend income. Total up your Personal Allowances - usually £11,000 - and put a tick that far up from the bottom of the column.

All income below, plus the first £6.000 of taxable savings income above, the tick will be taxed at 0%.

While you're being MSE, your wife might also like to apply for the Marriage Allowance Transfer. With the data you quote it sounds as though you (plural) would benefit.

My headline salary, even with some purchased annual leave is over the £45000 threshold before pension deductions. Is it the figure "taxable pay" on my payslip x12 I use to work out if I qualify, or the gross figure before my pension contributions of 12% are deducted ?

polymaff

polymaff wrote: »

This assumes we are talking 2016/17 and - to keep it simple - that you're not a higher rate tax payer. (and that you understand the rather arcane definition of who is a higher rate tax payer!).

Draw a, to-scale, column representing your taxable gross income. The lower part of the column should be your taxable non-savings income (earnings, pensions, etc); next up the column should be your taxable savings income; the top part should be your dividend income. Total up your Personal Allowances - usually £11,000 - and put a tick that far up from the bottom of the column.

All income below, plus the first £6,000 of taxable savings income above, the tick will be taxed at 0%.

While you're being MSE, your wife might also like to apply for the Marriage Allowance Transfer. With the data you quote it sounds as though you (plural) would benefit.

buyhighselllow wrote: »

Hi I looked at this before. However my headline salary, even with some purchased annual leave is over the £45000 threshold. I do pay 12% of my gross salary into a Pension scheme but presume its the headline rate that they base the decision on whether you qualify for the Marriage Transfer Allowance :mad:

You should get it - that is what I meant by "arcane" - but I took your initial post at face value. Why not try?

Anyway, the main point of my post was to give you a concise, rigorous but simple guide to your savings issues. Did you get it?