Personal Savings allowance

Dazed_and_C0nfused

Anthear said:

Jeremy535897 said:

They don't tell you how they calculated the figure, because you might then disclose something they weren't aware of.

You allocate the interest between the parental and other contributions on a pro-rata basis, but you would need evidence to show it didn't all come from the parent. (It is better to avoid mixed accounts like this.)

OK - I've found this:  https://www.gov.uk/apply-tax-free-interest-on-savings and the figure is £17,570.  In the 2019-20 tax year I didn't exceed that figure, but I did the 2020-21 tax year.  So am I correct in thinking that provided my earnings are under £17,570 then I have £5k of savings allowance not £1k?  Thanks

If you have sufficient income of the right sort you can have both the £5,000 and £1,000 rate bands.

If you haven't applied for Marriage Allowance then you can have £18,570 taxable income before any tax would actually be payable on any taxable interest.

That consists of,

Personal Allowance £12,570
Savings starter rate upto £5,000 taxed at 0%

Savings nil rate upto £1,000 taxed at 0%

If you have applied for Marriage Allowance the figures are

Personal Allowance £11,310
Savings starter rate upto £5,000 taxed at 0%
Savings nil rate upto £1,000 taxed at 0%

If you have earnings or pension income above your Personal Allowance the £5,000 rate band is reduced pound for pound above the Personal Allowance.  So if you have a Personal Allowance of £12,570 and earnings or pension income of £17,570 or more you will only be able to use the savings nil rate (upto £1,000 taxed at 0%).

NB.  Ignore my previous figures, it is £17,310 and £18,570 which are the correct figures for the current tax year.

Anthear

Dazed_and_C0nfused said:

Anthear said:

Jeremy535897 said:

They don't tell you how they calculated the figure, because you might then disclose something they weren't aware of.

You allocate the interest between the parental and other contributions on a pro-rata basis, but you would need evidence to show it didn't all come from the parent. (It is better to avoid mixed accounts like this.)

OK - I've found this:  https://www.gov.uk/apply-tax-free-interest-on-savings and the figure is £17,570.  In the 2019-20 tax year I didn't exceed that figure, but I did the 2020-21 tax year.  So am I correct in thinking that provided my earnings are under £17,570 then I have £5k of savings allowance not £1k?  Thanks

If you have sufficient income of the right sort you can have both the £5,000 and £1,000 rate bands.

If you haven't applied for Marriage Allowance then you can have £18,570 taxable income before any tax would actually be payable on any taxable interest.

That consists of,

Personal Allowance £12,570
Savings starter rate upto £5,000 taxed at 0%

Savings nil rate upto £1,000 taxed at 0%

If you have applied for Marriage Allowance the figures are

Personal Allowance £11,310
Savings starter rate upto £5,000 taxed at 0%
Savings nil rate upto £1,000 taxed at 0%

If you have earnings or pension income above your Personal Allowance the £5,000 rate band is reduced pound for pound above the Personal Allowance.  So if you have a Personal Allowance of £12,570 and earnings or pension income of £17,570 or more you will only be able to use the savings nil rate (upto £1,000 taxed at 0%).

NB.  Ignore my previous figures, it is £17,310 and £18,570 which are the correct figures for the current tax year.

Many thanks for this - just to clarify - I don't have pension, just income from employment and usually have the bog-standard £12,570 personal allowance.  Don't qualify for the Marriage Allowance. ;-)

OK - I kinda get the savings allowance and the £5k, but, being honest, I do find it confusing... and I think the fact that in the 2019/20 tax year my earnings were circa £16.7k, but for the 2020-21 tax year I've earned more than £17,570.

So essentially, if my earnings are under £17,570 I get a portion of the £5k (depending on how much of the allowance is left between £12,570 and £17,570) in additional to the £1k?

Thanks so much for the explanation, really helpful.

xylophone

When a parent gives money to their child, the income on that money remains taxable on the parent until the child reaches age 18. That has been the case for a very long time (not far off a hundred years).

Not exactly. See (but bearing in mind that all interest is now paid gross  and these are dated before the introduction of the PSA).

https://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/families/babsi.htm

https://webarchive.nationalarchives.gov.uk/20121003204631/http://www.hmrc.gov.uk/tdsi/example5.htm

https://www.thepfs.org/learning-index/articles/investing-for-children-part-2/57447

However, when parents make gifts for the benefit of their own minor unmarried children, not in a civil partnership, greater care is needed in finding a tax-effective solution given the anti-avoidance rules that exist (where income generated from parental gifts to a minor unmarried child not in a civil partnership, on all gifts from the same parent, exceeds £100 gross in a tax year it will be assessed to income tax on the donor parent– the so-called “£100 rule”).

The £100 rule does not apply to gifts by parents into CTF/JISA.

Jeremy535897

I had forgotten that £100 exemption, probably because in normal times it was so trivial, but with today's abysmal interest rates you can have quite a large balance before reaching £100 in interest.