Over £1000 in savings interesr tax question

Kernel_Sanders

Dazed_and_confused wrote: »

But the current 0% tax rates may be be around forever so maybe getting money in a tax exempt wrapper has long term benefits for some people.

I'm presuming you meant 'may not' instead of 'may be'. I'm now wondering if you actually meant 'can' instead of 'cannot' here ...

Dazed_and_confused wrote: »

Do you expect to have non savings income (taxable wages, pension business profits rents etc) greater than £17,500 in 2019:20?

If not you cannot immediately make use of the savings nil rate (aka PSA).
.

Dazed_and_confused

Apologies. Should have read it back!

Correct on the first point - that was meant to be current 0% rates may not be around for ever.

The second bit is correct.

The savings nil rate (PSA) is of no use to
people with lower incomes, simply because they have no need for it.

Everyone can in theory get £18,500 interest tax free in 2019:20.

Firstly there is the £12,500 Personal Allowance

Secondly the £5,000 savings starter rate of tax (0% in 2019:20)

Only after these have been used does the savings nil rate apply (up to £1,000 at 0%).

So until non savings non dividend income hits £17,500 (£12,500 + £5,000) the savings nil rate doesn't come into play.

Remember the savings starter rate is reduced (pound for pound) by any non savings non dividend income over £12,500.

So if you have non savings non dividend income of say £18,000 you would have no savings starter rate and could then make use of the savings nil rate (PSA).

Dazed_and_confused

Polymaff

May not be around ?

Correct. Didn't read my post back sorry!

Sea_Shell

Anecdotally, I'm a low earner, well within the PA but I earned £1200 interest in 2017/18. My tax code has been reduced (from January 19) by 120. I've not had any tax deducted from my payslip. This all happened automatically.

Dazed_and_confused

That is normal practice for HMRC.

Your savings interest is not liable to tax because of your spare Personal Allowance so they include the interest as a deduction in your tax code - to reflect the fact that your allowances have been used to make the interest not liable to tax.

This lower tax code should not make you start paying tax, and it hasn't so all sounds correct.