NS&I Fixed Rate Renewal

Dazed_and_confused

I pay 25% through salary sacrifice to my pension, I could increase that a bit and live off the cash to bump the wages I suppose..

Just how low have you taken your taxable pay (P60 figure) down to? It probably doesn't apply to you but if it's low enough you could potentially benefit from the starter savings rate of tax rather than the Personal Savings Allowance (which I presume is hat you mean by the reference to "£1k interest limit).

Personal Savings Allowance means upto £1,000 is taxed at 0%.

Starter savings rate is a similar 0% tax band but applies to a maximum of £5,000 interest. But the exact amount you can have taxed at 0% depends on what your taxable salary, company benefits etc total.

If you are able to use the £5,000 band then you will get the Personal Savings Allowance rate in addition so potentially £6,000 savings interest all taxed at 0%.

6022tivo

I am seriously considering increasing my salary sacrifice from 25% to 90%
How low would I have to take it to get this rate.

EDIT
It means that most people with a total income of less than £15,600 will not pay any tax on their savings. If someone!!!8217;s total income (such as wages, pension, benefits and savings income) is less than their personal allowance, plus £5,000, they will be able to register for tax-free savings with their bank or building society.

The income includes pension though?

Salery sacrifice doesn't count, but my other benefits do, health etc..

I've looked at the case studies, so if I try and get paid (inc benefits) around £11500, I won't pay any tax (just NI) then I'm allowed savings tax free of around £5k to around £15800

Very interesting.

Dazed_and_confused

The starter savings rate applies to upto £5,000 of taxable interest and is applied after your Personal Allowance.

However this rate band is reduced pound for pound for each pound you earn from taxable wages, company benefits, pension income, rents etc (basically everything taxable except savings interest and dividends) over and above the Personal Allowance.

For example if your wages etc were £11,500 you can benefit from the full £5,000 savings rate band.

But if your wages etc were £16,000 you only get £500 of the starter savings rate band.
NB. The Personal Savings Allowance is available on top of the starter savings rate band.

As soon as you hit £16,500 in wages etc you have lost this rate band and will have to rely solely on the Personal Savings Allowance rate band of upto £1,000 taxed at 0%.

6022tivo

So, say for theoretical reasons I get paid £40000, I can tell my company I want to lose 75% of my salary for salary sacrifice.

I would get paid £10000 a year (minus some NI) and then I would get £5000 tax free interest?
My pension would be boosted by £30000 a year (My company pass their NI savings to me as well, further bonus) + the company 10% (Maybe 5%).

Keeping it simple here?

Dazed_and_confused

I wouldn't consider it tax free (that's ISA's) but it would be taxed at 0%.

I know it probably seems the same but ifyou were caught by the High Income Child Benefit Charge you would soon understand the difference!

I thought salary sacrifice had changed to limit the benefits but maybe pension contributions are still ok?

If your earned income was £10,000 you could actually have (current tax year) up to £7,500 savings interest and pay no tax on it

£1,500 - covered by spare Personal Allowance
£5,000 taxed at 0% (starter savings rate)
£1,000 taxed at 0% (Personal Savings Allowance rate)

It isn't just wages that count though it's all taxable income except savings interest and dividends so if you have a company benefit such as a car or Medical insurance you need to add that onto your taxable wages. Likewise anything like rental income.

6022tivo

My current income is Wages
Savings Interest
Premium Bonds and various Tax free NS&I products
I'm in a company share scheme which ends this summer in which I pay in after tax, and I get and will receive the shares at the bargain price when the scheme opened, I will exercise these and sell on the day I receive them. My understanding that my initial contribution and up £11,xxx (Capital gains limit) is safe from any tax, and is not classed as an income? Not sure about this though.
Nothing from anything else. No BTL or anything, thank god.

Dazed_and_confused

You can ignore Premium Bonds and the NS&I products of they are genuinely "tax free" in the same way an ISA is tax free.

If the share scheme is going to result in a capital gain then that won't affect your income tax rate (although your income tax rate can affect the capital gains tax rate if you make enough profit to go over your capital gains allowance/exemption).

It would probably be wise to check the share scheme out with your employer just to be 100% certain there is no income tax element.

6022tivo

Yeah no tax implications.

My only unlikely concern would be if the profit on the day of purchase and sale was over the CGT limit. If so I would only sell the volume to keep under that limit.
The remaining I would leave until the following tax year, any dividends in that time count as income I guess.

Dazed_and_confused

Yes the dividends would be income but they aren't counted as earned income and come last in calculating your tax, after the savings interest.

There is also a 0% tax rate for the first £2,000 of dividend income (in 2018:19).

sjp999

6022tivo wrote: »

Yeah no tax implications.

My only unlikely concern would be if the profit on the day of purchase and sale was over the CGT limit. If so I would only sell the volume to keep under that limit.
The remaining I would leave until the following tax year, any dividends in that time count as income I guess.

Nothing to add to the thread here just want to say it's good to see an S1 TiVo related username from the old days.