£5000 Savings Rate Band - non-savings taxable income

simon_or

As I understand it, if one has up to £12,570 of non-savings taxable income, they can have £5,000 of interest 'starting rate for savings' at 0% tax, plus £1000 of PSA.

In the above context, do dividends count towards the £12,570 limit? And the same question about property income < 1,000.

I hope my question is clear! TIA

Dazed_and_C0nfused

Dividends would only be relevant if they use part of the Personal Allowance.

Profit from property income could use both the Personal Allowance and, if taxed at 19% or 20% would use some of the savings starter rate band.

You can only use the £1,000 savings nil rate band (aka PSA) once the Personal Allowance and savings starter rate band have both been fully used.

Jeremy535897

This answers your question:
https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me

"The starting rate for savings is a special 0% rate of income tax for savings income that falls within certain limits. The starting rate for savings band is £5,000 for 2022/23. The 0% rate applies to as much of the first £5,000 of taxable income (after deducting the personal allowance and blind person’s allowance, if eligible) that is savings income. Note that dividend income is taxed after savings income. As a result, if you have dividend income it will not affect whether you are eligible for the starting rate for savings on your savings income.

The starting rate for savings will only apply to you if you have some savings income and your earned income and other non-savings, non-dividend income, before deducting the personal allowance (and blind person’s allowance, if eligible), is lower than a certain threshold. If you are not eligible for the blind person’s allowance, this threshold is £17,570 in 2022/23 (this is the £12,570 personal allowance plus the £5,000 starting rate for savings band). If you are eligible for the blind person’s allowance, the £17,570 threshold increases to £20,170 (being £12,570 personal allowance plus £2,600 blind person’s allowance plus £5,000 starting rate for savings band). These figures assume that you have not given up part of your personal allowance as part of a claim to the marriage allowance.

If your taxable earned and other non-savings, non-dividend income is above £17,570 for 2022/23 (or £20,170 if you are eligible for the blind person’s allowance), the starting rate for savings will not apply to your taxable savings income.

If any of your taxable savings income falls within the first £5,000 of the basic rate band, you will not be liable to pay any tax on that taxable savings income, as the starting rate for savings income is 0%.

As an example, if, in 2022/23, you are not eligible for the blind person’s allowance, you have pension income of £13,000 and savings income of £2,000, you will have total income of £15,000. This is less than £17,570, so you will be eligible for the starting rate for savings. We deduct the personal allowance (£12,570 in 2022/23) from the pension income which leaves £430 left to be taxed at 20%. The starting rate for savings applies to as much of the first £5,000 of taxed income that is savings income. In this case, the starting rate for savings could apply to up to £4,570 of savings income. As the savings income is only £2,000, all of it will be ‘taxed’ at the starting rate for savings, which is 0%.

What are the upper and lower limits of income to get the starting rate for savings?

The guide below just provides the general rule. This may not provide you with the correct result if you have additional tax allowances or expenses that you can claim.

If you have taxable earned and other non-savings, non-dividend income of between £12,570 and £17,570, the savings rate will apply to at least part of your savings income (as in the example above)."

See bold highlights. Rental income is non-savings income.

simon_or

Thanks both, I think I understand now.

Dazed_and_C0nfused

Just to add I think dividends using some of your Personal Allowance would be a very niche situation.