Savings for retired parents

jilawrence

Hello all.

I'm sure this has probably been asked before, but I can't seem to find a straightforward answer on gov.uk or similar websites...

I understand that a basic rate taxpayer can earn £1000 in interest from savings before tax is deducted by the bank or building society, but does the same rule also apply once you have retired and become a pensioner?

My parents have money from the sale of their house, and I'd like to find out if it's worth them continuing investing in ISAs to minimise tax deductions, or whether they can just put all their funds in regular savings accounts as they won't get taxed anyway?

Thanks in advance for any advice.

Linton

Pensioners dont have any special allowances for savings interest or other income.

If the house sale has provided a serious amount of money (eg >£50K), the parents need it for ongoing income and they aren't say >85 it may be sensible for them to consult an IFA with regards to some level of investments. This could provide a better return than bank/ISA interest.

IanManc

jilawrence wrote: »

Hello all.

I'm sure this has probably been asked before, but I can't seem to find a straightforward answer on gov.uk or similar websites...

I understand that a basic rate taxpayer can earn £1000 in interest from savings before tax is deducted by the bank or building society, but does the same rule also apply once you have retired and become a pensioner?

My parents have money from the sale of their house, and I'd like to find out if it's worth them continuing investing in ISAs to minimise tax deductions, or whether they can just put all their funds in regular savings accounts as they won't get taxed anyway?

Thanks in advance for any advice.

Tax is no longer deducted by a bank or building society at all, no matter how much interest you earn.

jilawrence

Linton wrote: »

Pensioners dont have any special allowances for savings interest or other income.

If the house sale has provided a serious amount of money (eg >£50K), the parents need it for ongoing income and they aren't say >85 it may be sensible for them to consult an IFA with regards to some level of investments. This could provide a better return than bank/ISA interest.

Brilliant, many thanks for the info.

jilawrence

IanManc wrote: »

Tax is no longer deducted by a bank or building society at all, no matter how much interest you earn.

Hi. Sorry, I don't understand - would you be able to elaborate please? Do you mean that it gets charged via some other method, rather than by the bank/building society? Thanks.

MallyGirl

Yes - via a self assessment tax return

jilawrence

MallyGirl wrote: »

Yes - via a self assessment tax return

I'm even more confused now! The gov.uk website states that self assessment tax returns apply if "your income from savings or investments was £10,000 or more before tax" which certainly doesn't apply to my parents. The interest from their savings will likely only be slightly more than the £1000 limit.

Please can anyone just give me a straightforward answer in layman's terms please.

Thanks a lot.

xylophone

See


https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

jilawrence

Thanks. So if I've read it correctly, for basic rate taxpayers that exceed the £1000 personal savings allowance, HM Revenue and Customs will normally collect the tax by changing your tax code.

However for my parents, I presume this part applies...

3. If your taxable income is less than £17,500
If your total taxable income is less than £17,500 you won’t pay tax on any savings income.

They don't earn anything because they are retired. So, in other words, they needn't bother with ISAs, and can place all their funds into regular savings accounts (if they so wish) without paying any interest, even if the total interest accrued is greater than £1000 per year?

Am I correct in my thoughts above?

Thanks again all.

Linton

jilawrence wrote: »

....
They don't earn anything because they are retired........

No State Pension? No work pensions? How do they live?

xylophone

They don't earn anything because they are retired.

That they don't earn anything has nothing to do with whether or not they have taxable income.

It would be quite possible for a person whose only income was his pension(s) to be a higher rate tax payer if his pension income was high enough.

You have stated that they both have pension income and savings income.

Try here for examples

https://www.litrg.org.uk/tax-guides/other-tax-issues/savings-and-tax