Tax Credits - other income - savings interest

csb

Hello,

I spoke to an advisor on the Tax Credits help line regarding what interest has to be declared as other income. I was told that the £1000 tax free allowance on savings interest should not be applied for tax credits and all interest should be declared minus the £300 other income allowance.

What seems strange with this response is that interest from tax free savings accounts (e.g. ISA) does not have to be declared. I would have thought that interest received under the £1000 personal allowance would therefore be in the same category.

Does anyone have any thoughts on this?

Many thanks

zagfles

It's not in the same category. ISA interest is tax free. Normal savings interest is taxable, but you have an allowance before tax is actually charged.

It's no different to having employment income of say £10k. No tax to pay as it's under the personal allowance, but it still counts as income for tax credits.

Icequeen99

Tax credits generally follow income tax principles - so if it is taxable then it is income for tax credits. (There are some exceptions to this).

The PSA is an allowance - the interest itself (in some cases) remains taxable and so is income for tax credits. Just like income from employment - it counts as income for tax credits even though it may be under your personal allowance therefore no tax due on it.

IQ

Dazed_and_confused

As far as income tax is concerned there is no tax-free "allowance" for savings interest.

The "Personal Savings Allowance" is actually a 0% tax band applied after the 0% savings starter rate tax band.

As zagfles has said other than genuine non taxable things such ISA's all savings interest is taxable. But some of it may be taxable at one of the 0% tax rates.

csb

Many thanks for your responses. They have helped me to understand how this allowance works.

Katrin24

Is it mean that if under 300 leave blank on renewal or put 0??which is correct

poppy12345

Katrin24 wrote: »

Is it mean that if under 300 leave blank on renewal or put 0??which is correct

You keep posting the same question on different threads. If you keep to the same thread you started earlier then people won't be confused.


There are only a few people that post regular here that are very knowledgeable with HMRC and tax credits. As it is Saturday evening they could be busy doing other things, rather than checking the forum. Once they see your questions they will answer you.

Alice_Holt

Katrin24 wrote: »

Is it mean that if under 300 leave blank on renewal or put 0??which is correct

https://www.gov.uk/guidance/tax-credits-working-out-income

"Enter the final figure on your tax credits claim form or annual declaration in the ‘other income’ box. If you end up with a minus figure, enter 0."

Is what a quick google of the guidance says.