Exceeding Personal Savings Allowance...

vonsworld

Hello
I understand we have a personal savings allowance of £1000 per annum, but if you exceed that amount do you instantly pay tax or is it carried over into your income tax allowance. So that if you haven't used up your income tax allowance of say £12500/year you still won't pay tax on the savings?
Thanks for your advice
Robin 

ddss

yes.......

Alexland

https://www.moneysavingexpert.com/savings/tax-free-savings/

"Okay, why's the limit £18,500 – sounds like a random figure? Well, it's made up of three separate allowances. The first is your personal allowance – this is the amount you can earn without paying any income tax – for most people this allowance is £12,500 (for 2020/21).

On top of that allowance there's the £5,000 starting savings rate where the tax rate is 0%, so again this is the amount you can earn in savings interest before paying any tax on that.

Finally there's the personal savings allowance worth up to £1,000."

vonsworld

Thanks for your replies, so basically if you are retired and living off your savings with no income from work, you would have to earn £13500 in savings interest before you paid any tax?
 

eskbanker

vonsworld said:

Thanks for your replies, so basically if you are retired and living off your savings with no income from work, you would have to earn £13500 in savings interest before you paid any tax?

£18,500, as per the preceding post....

Alexland

Even if you have "no income from work" are you receiving any state or personal pension income this tax year?

Dazed_and_C0nfused

vonsworld said:

Thanks for your replies, so basically if you are retired and living off your savings with no income from work, you would have to earn £13500 in savings interest before you paid any tax?
 

Unless you have applied for Marriage Allowance you will not have any tax to pay on savings interest unless your total taxable income exceeds £18,500.

The savings nil rate of tax (aka Personal Savings Allowance) is only of use if you have total taxable income of at least £17,501.  Under that amount you would pay no tax on interest by virtue of either the Personal Allowance and/or savings starter rate of tax (upto £5,000 of interest taxed at 0%).

Basically if you are on a low income forget about the Personal Savings Allowance as it doesn't apply to you. 

epm-84

If you register for an online tax account you'll see there's a section where HMRC estimate how much you'll earn this year based on last year's income.  If this is wrong and it affects how much tax you will pay there's an option to tell them.

Tax on interest used to be deducted by the bank or building society.  Now if you paid through PAYE it's taken from your income through the issuing of a different tax code.

RG2015

epm-84 said:

If you register for an online tax account you'll see there's a section where HMRC estimate how much you'll earn this year based on last year's income.  If this is wrong and it affects how much tax you will pay there's an option to tell them.

Tax on interest used to be deducted by the bank or building society.  Now if you paid through PAYE it's taken from your income through the issuing of a different tax code.

There used to be an option to tell them online if the estimate was wrong but this has not been available for a few weeks. Furthermore, it was not working for all interest sources and  some users here were never able to access this HMRC page.