Tax on savings interest

gibbo9

My wife currently draws £240 per month from her HL SIPP ie £2880 per annum which will be paid back into the SIPP sometime during the following tax year. She has no other income other than savings account interest. She has transferred £1150 of her tax allowance to me using the Marriage Allowance.
How much interest can she earn in a tax year without incurring tax?
We're currently going round in circles trying to work it out so are hoping some one will give us a simple explanation.
Many thanks in anticipation

xylophone

Your wife has reduced her Personal Allowance to £11,250.

£2880 of that is used up by her pension income which is her only income except interest from savings.

She can use the balance of her PA against savings income and then on top of that she would have the starting rate for savings and on top of that the Personal Savings Allowance.

https://moneyfacts.co.uk/savings-and-isas/guides/how-are-my-savings-taxed/

gibbo9

Many thanks for that very succinct reply. Clear and concise as usual. Thanks for the link as well, that was one we hadn't looked at. Some of them are like wading through a thick. fog. Fog now cleared. Regards

Dazed_and_confused

She can't transfer £1,150 of her allowance in the current tax year. It is £1,250 or nothing.

If she has applied for Marriage Allowance for the current tax year then she could earn £14,370 in taxable interest before any tax would actually be payable.

If she had a deferred State Pension which is eligible for a lump sum payment (pre April 2016 deferment?) and she took this it would all be taxable at 20% even though she wasn't actually paying tax on her other income.

Not a likely scenario but one with a nasty sting in the tail if it applies to her.

gibbo9

Sorry for the error, too many bits of paper whilst writing my post, but thanks for putting an actual figure on the interest sum, not that we'll be getting anywhere near that, but good to know

Dazed_and_confused

It doesn't sound like it will make any difference but the order the £14,370 is achieved is,

£8,370 unused Personal Allowance

Once that is used up there is

£5,000 savings starter rate (0%)

And once that is used there is

£1,000 savings nil rate (0%)

lindabea

Dazed_and_confused wrote: »

It doesn't sound like it will make any difference but the order the £14,370 is achieved is,

£8,370 unused Personal Allowance

Once that is used up there is

£5,000 savings starter rate (0%)

And once that is used there is

£1,000 savings nil rate (0%)

Where does the dividend allowance fit in this hierarchy of tax allowances?

Dazed_and_confused

There is no allowance for dividends.

The dividends nil rate (0%) comes after savings income.

In unusual circumstances it might be better to allocate some of the Personal Allowance against dividend income but after the Personal Allowance is used up whatever is left is taxed in this order,

Non savings non dividend income
Savings interest
Dividends

xylophone

If you type LITRG savings and dividends into Google, it will bring up this useful explanatory fact sheet.

https://www.litrg.org.uk/sites/default/files/Savings%20and%20dividend%20tax%202018.19%20FINAL.pdf

You can't just "click on the link" unfortunately.

Scrounger

http://www.litrg.org.uk/tax-guides/other-tax-issues/savings-and-tax


Scrounger