Personal savings allowance (HMRC tale) #2

Anthear

Thanks to all who contributed to my previous post about this.....

Finally managed to speak to someone today who said that the £5k was not a thing and that the allowance (basic rate tax payer) was £1k.  I did go through what was online and explained my understanding but was told I was incorrect....


Just an example I ran through with the call handler; if in 2019-20 I earned say, £15.5k  (So my income is less than £17,570)
my personal allowance was £12.5k so 15.5 - 12.5 = £3k
£5k - £3k = £2k <- remainder of £5k allowance.

Do I get the £2k (portion of the £5k) plus the £1k?

Any thoughts??

Jeremy535897

Your post is confused. I think you mean 2021/22, with a personal allowance of £12,570.

If you earn £15,570, say, and have savings income of £3,000, your £12,570 personal allowance will be set against your earnings, leaving £3,000 chargeable at 20%. The £3,000 reduces your starting rate for savings down to £2,000, as you say. It would seem that you also get the £1,000 personal savings allowance, so if your savings interest is £3,000 you pay no tax on it. See https://www.moneysavingexpert.com/savings/tax-free-savings/

Dazed_and_C0nfused

Finally managed to speak to someone today who said that the £5k was not a thing and that the allowance (basic rate tax payer) was £1k

You have spoken to someone who has no idea what they're talking about.

There are no £5k or £1k "allowances" but there are £5k and £1k 0% rate bands.

If your earnings are £15,500 and you have not applied for Marriage Allowance then you will use £2,930 of your basic rate band on your earnings.

That leaves £2,070 of the savings starter rate band available and if you have sufficient interest you can also utilise the £1,000 savings nil rate (assuming you wouldn't be a higher rate taxpayer without it).

This is explained on gov.uk (they refer to the Personal Savings Allowance but that is actually the savings nil rate band).

https://www.gov.uk/apply-tax-free-interest-on-savings

Anthear

Dazed_and_C0nfused said:

Finally managed to speak to someone today who said that the £5k was not a thing and that the allowance (basic rate tax payer) was £1k

You have spoken to someone who has no idea what they're talking about.

There are no £5k or £1k "allowances" but there are £5k and £1k 0% rate bands.

If your earnings are £15,500 and you have not applied for Marriage Allowance then you will use £2,930 of your basic rate band on your earnings.

That leaves £2,070 of the savings starter rate band available and if you have sufficient interest you can also utilise the £1,000 savings nil rate (assuming you wouldn't be a higher rate taxpayer without it).

This is explained on gov.uk (they refer to the Personal Savings Allowance but that is actually the savings nil rate band).

https://www.gov.uk/apply-tax-free-interest-on-savings

Thank you - I have finally caught up!  Many thanks for the explanation, much appreciated.  My poor brain took a while to figure out how it was all calculated.