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murphydavid

caveman38 wrote: »

Would you be so kind as explain where you got the £26,100 from.

2015 you won’t have to pay tax on your interest if
your taxable income is less than £15,600 + £10500 tax free income (personal allowance) = 26,100 ie if you have a taxable pension of 15600 then you have a gross pension of 26,100. My pension provider and my bank interest rates always quotes the gross amount; in my opinion to avoid misdirection so should the government.

polymaff

murphydavid wrote: »

2015 you won’t have to pay tax on your interest if
your taxable income is less than £15,600 + £10500 tax free income (personal allowance) = 26,100 ie if you have a taxable pension of 15600 then you have a gross pension of 26,100. My pension provider and my bank interest rates always quotes the gross amount; in my opinion to avoid misdirection so should the government.

You've got it all wrong, wrong in principle, figures and applicable tax year. When HMRC quote a figure like the £15,600 or £16,800 tax-on-interest free in the document you posted the link to, they are giving a rather dishonestly mis-leading figure of the the absolute best case - rather like the telecomms industry promising "up to 8 Megabits per second" broadband. That figure includes the best-possible deployment of Personal Allowance, the Starting Rate Allowance and the Personal Savings Allowance - so you thinking that you can then add the Personal Allowance again is just completely wrong.

bristolleedsfan

polymaff wrote: »

*The £15,600 never got beyond the proposal stage.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414026/Savings_factographic_final.pdf

"At Budget 2014, we announced that from April
2015 you won’t have to pay tax on your interest if
your taxable income is less than £15,600"

"Today we’re going further, so that from April 2016
95% of people will not have to pay tax on the
first £1,000 (or £500 for higher rate taxpayers) of
interest they earn on their savings. This is called a
Personal Savings Allowance"

"That means from April 2016, you won’t have to
pay tax on your interest if your taxable income is
less than £16,800"

polymaff

bristolleedsfan wrote: »

...

My editing error. It was the £16,800 that never got beyond the proposal stage.

bristolleedsfan

polymaff wrote: »

My editing error. It was the £16,800 that never got beyond the proposal stage.

Are you certain about that?

murphydavid

polymaff wrote: »

You've got it all wrong, wrong in principle, figures and applicable tax year. When HMRC quote a figure like the £15,600 or £16,800 tax-on-interest free in the document you posted the link to, they are giving a rather dishonestly mis-leading figure of the the absolute best case - rather like the telecomms industry promising "up to 8 Megabits per second" broadband. That figure includes the best-possible deployment of Personal Allowance, the Starting Rate Allowance and the Personal Savings Allowance - so you thinking that you can then add the Personal Allowance again is just completely wrong.

Yes you are correct I did. The exact bit I read was "At Budget 2014, we announced that from April 2015 you won’t have to pay tax on your interest if your taxable income is less than £15,600" Which I took at face value. Ie The words "taxable income" when I see it in my tax statement; means the amount of income I pay tax on. Having looked up 2014 budget I see that in the above quote in my case it means my gross income.
I am now trying to get my head round the 2014 budget statement which says
"1.170 Currently, the first £2,790 of savings income above the tax-free personal allowance is taxed at a starting rate of 10%. In order to provide further support for the lowest income savers, the Budget announces that from April 2015 the 10% savings rate will be reduced to 0%. The government will also increase the band of savings income that is subject to the 0% rate to £5,000. As a result of these measures, the government expects 1.5 million people to benefit, with an average gain of over £150 per year. This means that anyone with total income of less than £15,500 per annum will no longer pay any tax on their savings income.”
My question is does this also mean that everyone, no matter what they earn, can claim back the tax on their savings interest if they got less than £5000 interest?
PS I'm glad someone can understand it.

colsten

polymaff wrote: »

My editing error. It was the £16,800 that never got beyond the proposal stage.

It's actually going to be £17,000 as the personal allowance will be £11,000 instead of the £10,800 originally planned.

polymaff

bristolleedsfan wrote: »

Are you certain about that?

Yes, the Personal Allowance for 2016/17 was upped by another £200 recently - upping the figure in question to £17,000

Of course, the new figure is also, still, at the planning stage. Nothing is set in stone until Parliament passes the relevant Finance Act.

polymaff

murphydavid wrote: »

My question is does this also mean that everyone, no matter what they earn, can claim back the tax on their savings interest if they got less than £5000 interest?
PS I'm glad someone can understand it.

What you are questioning is called the Starting Rate Allowance. This has been a slightly awkward allowance in that it decreases pound for pound as taxable non-savings income - just about everything taxable to income tax other than savings interest and dividends - exceeds the Personal Allowance. Before 2015/16 this allowance was in the £2000 range, and the allowance was that the tax was 10% rather than the previous basic rate figure. From, and including, 2015/16 the range has been increased to £5,000 and the rate has dropped to zero - BUT - the pound-for-pound trade-off still takes place.

The SRA was targetted at lower income folk, the new Personal Savings Allowance is targetted at non-high income folk. The PSA doesn't involve the pound-for-pound methodology of the SRA. Its algorithm is that you get it in full (£1,000) if your marginal income tax rate is zero or basic rate; you get half (£500) of it if your marginal tax rate is higher rate; you get none of it if your marginal tax rate is the additional rate.

Note that this doesn't necessarily pan out fairly. I'm sure that originally, some Treasury Wallah said "hey, 20% of £1,000 equals 40% of £500 - so ir all pans out fairly" - ignoring the fact that due to other taxation changes, some folk will only get the £500 PSA when they don't actually pay a penny at 40%.

And this was meant to be an era of tax simplification! :(

BodMor

The other change to tax allowances that hasn't had anything like the same level of publicity is the Dividend Allowance (HMG have a factsheet you can find on Google with dividend-allowance-factsheet).

This is similar to the PSA but simpler (no basic/higher payer difference). It means that you won’t have to pay tax on the first £5,000 of your dividend income, no matter what non-dividend income you have. If you have moderate share holdings this opens more choices about what you do with your ISA allowance (although you would be exposed to any over CGT allowance capital gains on shares out of an ISA if you had to sell).