Interest on savings

polymaff

Gramski wrote: »

Thanks for that. Indeed I have claimed the marriage allowance. Should I cancel this before I start getting income from my pensions?

Your £12k of pension and £3k of taxable interest will, as things stand, reduce the benefit of MAT - but will not be a cause of loss.

Just keep an eye on the situation though, as people in similar circumstances can be trapped into a marginal tax rate of up to 40%. The danger signs are that your non-savings taxable income exceeds your personal allowance by an amount less than by the starting rate for savings allowance, and you start to actually have to pay some tax on your taxable savings income.

RG2015

polymaff wrote: »

Your £12k of pension and £3k of taxable interest will, as things stand, reduce the benefit of MAT - but will not be a cause of loss.

Just keep an eye on the situation though, as people in similar circumstances can be trapped into a marginal tax rate of up to 40%. The danger signs are that your non-savings taxable income exceeds your personal allowance by an amount less than by the starting rate for savings allowance, and you start to actually have to pay some tax on your taxable savings income.

I know that it would involves some speculation, but are you able to give a worked example of how the OP could end up with a marginal tax rate of 40%?

polymaff

RG2015 wrote: »

I know that it would involves some speculation, but are you able to give a worked example of how the OP could end up with a marginal tax rate of 40%?

No speculation required. Let's take a case where a chap's pension matches the Personal Allowance and his taxable savings income is £6,000.

In the current circumstances there is no tax liability. Now let his pension increase by £1.

20% to pay on that extra pound - but as the Starting Rate for Savings falls by a pound, 20% to pay on £1 of "uncovered" taxable savings income.

Nett result - that extra pound is taxed at 40%

It's a rotten circumstance - probably never thought of when HMT was working out this bit of legislation.

Incidentally, I haven't thought it all through, but that extra pound might as well have been £1 off the Personal Allowance - beware, Marriage Allowance Transfer fans.

p.s. Don't reply that it couldn't affect the OP's case. I said "keep an eye" - and the Chancellor has already reduced another £5k allowance to £2k

short_butt_sweet

Uxb wrote: »

You and I remember the days of investment income surcharge tax from the 1970's.
An additional tax of 15% on top of any existing tax for those people who actually were so 'rich' etc to have any savings and investment income other than their simple employment based income.

bring it back, i say! it was just roughly equivalent to the national insurance contributions that we pay on earned income, in addition to income tax. so it evened up the treatment of different kinds of income.

that's just fairness. nothing to do with who's 'rich'. i've had some tax years in which my taxable income is similar to the national average, but made up mostly of investment income, and i've paid a fraction of the taxes that somebody earning the same amount would pay.

Dazed_and_confused

Gramski wrote: »

Thanks for that. Indeed I have claimed the marriage allowance. Should I cancel this before I start getting income from my pensions?

Before you do anything I would suggest you get it absolutely clear in your own head exactly what income you will have going forward.

You have one thread talking about total pension income of £12k and in another it's £19k. Makes a big difference, particularly to tax on savings interest.

Might not matter too much with Marriage Allowance, you could pay £238 more than you need to and your wife may pay £238 less than normal but it all depends on hard facts.