£5k starting rate for savings

[Deleted User]

BOWLHEAD - That was a very neat and concise explanation. Thank you

[Deleted User]

bowlhead99 wrote: »

OK, so you receive £14425 of pension and £72 of fixed contractual rewards from the banks for the year, which is a total of £14497 of non-interest income.

You can afford for that income to be 'topped up' with interest income of £3003, taking you to a gross amount of £17500 for the 2017/18 tax year before any tax is due on your interest.

Basically you get
- your annual personal allowance of £11500,
- then the next £5000 on top of that is charged at 0% if it's savings interest income or 20% if it's non-interest income (pensions, salary, self-employment, royalties and £3pm fixed bank rewards, etc)
- you also have a £1000 personal savings allowance.

So your pensions and bank rewards will come up to £14497 which is £11500 tax free and £2997 at 20%. Then you can have another £2003 of interest income charged at 0% before hitting the £5000 limit in which interest income can be charged at the special rate of 0%. Then you still have the £1000 personal savings allowance that everybody gets if they need it and are not a higher rate or top rate taxpayer.



Footnote -
I'm assuming your interest income is only a few thousand quid. But if you have millions of pounds of cash savings, and your interest income from it was several tens of thousands of pounds, so that you reached the high rate (40%) income tax bracket, your £1000 personal savings allowance would be reduced to a £500 personal savings allowance.

As a basic rate person you should be OK to have the full £1000 PSA if you need it. If your interest income was under £2003 it would all be covered by the '0% starting rate for savings income' and you wouldn't need the £1000 PSA.

As you mention, ISA income is irrelevant and ignored.

That is all so very, very helpful, bowlhead99. Thank you very much.

The interest I receive, although I have not added it up fully, is well below £2,000 - I'll check, but it may be a bit over about £1,000 - not counting about £200 from my ISA by April 2018. Some time ago, with information on this very helpful forum, I moved some money from my ISA to a Granny bond.

I'm nearly 70 and can live very comfortably within my means - the interest I receive from savings is a welcome bonus.

Many thanks again for your helpful reply.

Crimson

[Deleted User]

[quote=[Deleted User];73638434]BOWLHEAD - That was a very neat and concise explanation. Thank you[/QUOTE]

Yes, lindabea - I agree fully - it is very helpful and really easy to understand.

Crimson