The Top Easy Access Savings Discussion Area

polymaff

Eco_Miser wrote: »

You're just arguing about the meaning of phrases which are actually synonyms in this context.



"... is a function of ..." and "... is based on ..." have the same meaning. Polymaff obviously prefers the more mathematical phrase.

....... Exactly.

masonic

So, BodMor's post, which seems to have started the above debate, was about the Dividend Allowance. My understanding is that the introduction of this Dividend Allowance would not affect anyone's marginal rate of tax (i.e. their taxable income will not be reduced by any dividend income falling within this band). So, anyone whose dividend income currently pushes them into the higher rate band would have a reduced PSA regardless of the Dividend Allowance. Am I mistaken?

Eco_Miser

colsten wrote: »

I have been aware of the change in dividend taxation since it was announced in the budget.

I absolutely agree that the level of the PSA is a function of net taxable income because it is, and it's what the law says. But I repeat that it is utter nonsense to say "tax paid on savings income will be a function of dividend income" because it isn't, and it's not what the law says.

So you disagree that net taxable income is a function of dividend income? Utter nonsense! Like many laws, it says one bit in one place and another bit in another place, but putting the bits together, the level of PSA is dependent on dividend income.

colsten wrote: »

I'll not change my view on this and I'll leave the debate at this stage.

And lose by default.

Eco_Miser

masonic wrote: »

So, anyone whose dividend income currently pushes them into the higher rate band would have a reduced PSA regardless of the Dividend Allowance. Am I mistaken?

That's my belief. The first £5000 of dividend income itself would be taxed at 0%, but the PSA would be reduced.

Now, what I'm not sure about is how dividend income interacts with the Starting Rate for Savings. Can someone have £11k pension income, £6k of savings income and £5k of dividend income, and still pay no tax?

masonic

Eco_Miser wrote: »

Now, what I'm not sure about is how dividend income interacts with the Starting Rate for Savings. Can someone have £11k pension income, £6k of savings income and £5k of dividend income, and still pay no tax?

IIRC, dividend income is currently ignored when calculating the non-savings taxable income for this purpose. I don't think that is going to change.

Eco_Miser

You're right about the current situation. The introduction of the dividend allowance, and its effect on PSA at the other end of the band, introduced doubts into my mind, and I haven't found an appropriate example.

masonic

Eco_Miser wrote: »

You're right about the current situation. The introduction of the dividend allowance, and its effect on PSA at the other end of the band, introduced doubts into my mind, and I haven't found an appropriate example.

Yes, it would be good if the worked examples produced in the guides to these changes covered the boundary cases. Dividend income is taken as the highest part of someone's taxable income, so it sits above savings income. Therefore, the nil rate savings band is used up before dividends are taken into consideration and that seems to be the underlying principle applying to that band of income. The PSA works a little differently, because it explicitly depends on your adjusted net income (which, of course, includes dividends and savings income). That's my understanding anyway.

polymaff

Eco_Miser wrote: »

That's my belief. The first £5000 of dividend income itself would be taxed at 0%, but the PSA would be reduced.

Now, what I'm not sure about is how dividend income interacts with the Starting Rate for Savings. Can someone have £11k pension income, £6k of savings income and £5k of dividend income, and still pay no tax?

Mine too. This will lead to folk who pay not a penny at 40% only receiving the £500 PSA.

And that will come as a surprise to them

polymaff

Eco_Miser wrote: »

You're right about the current situation. The introduction of the dividend allowance, and its effect on PSA at the other end of the band, introduced doubts into my mind, and I haven't found an appropriate example.

masonic wrote: »

Yes, it would be good if the worked examples produced in the guides to these changes covered the boundary cases. Dividend income is taken as the highest part of someone's taxable income, so it sits above savings income. Therefore, the nil rate savings band is used up before dividends are taken into consideration and that seems to be the underlying principle applying to that band of income. The PSA works a little differently, because it explicitly depends on your adjusted net income (which, of course, includes dividends and savings income). That's my understanding anyway.

Not from 6th April 2016. When I noticed this, immediately after the Budget, I wrote to HMRC with several case examples and their response confirmed that the computation of liability to income tax would no longer be one of three isolated steps.

Incidentally, the data supplied by HMRC is very poor, not just, as you say, in its choice of scenarios. Even worse, one of their documents illustrates what happens when the adjusted income is less than £43,000, what happens when the adjusted income is more than £43,000 - but not what happens when it is exactly £43,000. A classic schoolboy howler

diamonds

My top savings: TSB 5% but just got a Halifax Reward Account and opening another TSB account in old mans name for the other £2000 of savings, now just need to find somewhere to bank the remaining £500 and £300 a month... probably just open a TSB 5% Direct saver in his name too, unless anyone can recommend something better than above ? The 3 current accounts will be paying £15 a month to me

Any better ideas for current £4500 and a regular £300 a month saving