Unsure if I will be taxed on savings

puregeordie

Hello peoples,  hopefully a nice and easy Q here,  I am just in the 40% tax bracket "I Think"  I'm paid around £55,000 per year and have £50,000 in savings but not sure if I can have the £1000 personal tax allowance interest or will I have the £500 savings allowance interest limits ?  My tax free allowance is £14,000 due to my personal allowance and my fuel allowance.  I think I maybe just over the limit slightly or just under it.

I've kept my ISA at a not so good rate and wonder as long as I don't get charged tax on my savings it maybe worth while going for a higher rate but worried I might get taxed due to being over the PSA limits?

Just to be safe I've just kept my ISA currently at a rate of 1.1% at the moment.

Many thanks for helps.  

eskbanker

If you're earning £55K then your marginal tax rate will be 40% and therefore your PSA will be £500 rather than £1,000.

In terms of whether you'll actually pay any tax on your savings, it's unclear how much interest you'll be earning from taxable accounts?  The ISA interest obviously isn't taxable....

Albermarle

I think you also need to take into account that interest rates are rising . Nobody knows where they will end up, but more likely you will be getting 2 to 3 % ( depending on fixed term, ISA or not etc ) , so you need to base your calculations on that rather than 1% .

Dazed_and_C0nfused

puregeordie said:

Hello peoples,  hopefully a nice and easy Q here,  I am just in the 40% tax bracket "I Think"  I'm paid around £55,000 per year and have £50,000 in savings but not sure if I can have the £1000 personal tax allowance interest or will I have the £500 savings allowance interest limits ?  My tax free allowance is £14,000 due to my personal allowance and my fuel allowance.  I think I maybe just over the limit slightly or just under it.

I've kept my ISA at a not so good rate and wonder as long as I don't get charged tax on my savings it maybe worth while going for a higher rate but worried I might get taxed due to being over the PSA limits?

Just to be safe I've just kept my ISA currently at a rate of 1.1% at the moment.

Many thanks for helps.  

Earning £55k may not actually relevant.

It's your taxable pay, the amount which goes on your P60, that is the starting point.

So if you have a salary of £55k and contribute say 5% to a net pay pension scheme your taxable pay may only be £52,250.  Then you will have any allowable expenses to deduct.

You need to calculate your liability ignoring the savings nil rate band first.  If that shows you are a higher rate payer then the savings nil rate band is £500 not £1,000.

puregeordie

Much appreciated for your input.

ranciduk

If as a basic rate tax payer you were to earn approx £2000 in interest in a tax year - how much of that £2000 would you get to keep? Would it be about £1800?

eskbanker

ranciduk said:

If as a basic rate tax payer you were to earn approx £2000 in interest in a tax year - how much of that £2000 would you get to keep? Would it be about £1800?

Tempting though it is to give the one word answer, it's not as simple as that and depends on the rest of your income tax calculation - if your other taxable earnings were very low you might get to keep it all, or if they were close to the higher rate threshold you might get less than 90% of it, but for most in between it would be about £1,800, yes.  That assumes that the savings aren't in ISAs of course, and the situation may vary if the money is in fixed term accounts where the interest isn't accessible or isn't actually paid until maturity....