Personal Income Tax Allowance and savings interest

Martyn_H

The Personal Income Tax Allowance for the tax year 2019 is £12500. The first £1000 of savings interest is tax free for basic rate payers.

If my pension is £9000 pa and I receive £2000 savings interest, am I liable to pay tax to HMRC?

Thank you.

Dazed_and_confused

No but you are also not able to make use of the £1,000 "Personal Savings Allowance" (actually a 0% tax rate).

That is because your interest is covered by your Personal Allowance and doesn't need to actually be taxed.

Even if your pension was slightly more you still wouldn't owe any tax on the interest as it would be taxed at the savings starter rate of tax. Which is 0% in the current tax year.

The savings starter rate applies to savings interest of upto £5,000 but is reduced pound for pound if your pension or wages (non savings non dividend income) is more than your Personal Allowance. So pension or wages of £17,500 means no savings starter rate of tax and the savings nil rate comes into play.

The £17,500 is lower if you have applied for Marriage Allowance.