Personal Savings Allowance - Company Car - (Married to a part time earner) - where for savings?

Just_A_Dad

Good Morning all,

These increase in interest rates suddenly mean that PSA might need to be looked at in more details - whereby previously they haven't.

Currently I get about £35 per month from current accounts etc (in my sole name) - so fortunately that's under £500 a year limit - so regardless where I stand tax bracket wise - until now its been kind of irrelevant.

For interest they are in my name as they are all internet banking etc in one place that I can manage - but of course the money/savings is joint between my wife and I.

But with increases in interest rates , and a small increase in my salary etc I just need to check things over - or ask what would be best to do.


Anyhow circumstances are now

New Salary 44,262
New Company Car (BIK) 7,820

(Old salary and car BIK was under 50,270 threshold)

That puts me at 52,092 which is just into into the 40% (as its now just over the  50,270 max 20% income.

This means that immediately I can not earn over £500 interest per year or £41.66 interest per month with out having to pay tax on it - is that right?
And, does this mean that anything I do pay tax on would be a 40% of that extra value?

If that's the case - my wife is part time and is earns 16,000 PA - presumably we should move these accounts or savings into accounts with her name to allow for the £1000 PSA she is entitled too - is that correct?

Any other ideas?

Sorry I've very new to having any sort of savings - and of course this interest rate has got it to be a thing.

HCIMbtw

Are you using you full £20k ISA allowance? 

If not could just move some of your savings into an ISA and then no tax payable on any of the interest

Dazed_and_C0nfused

Currently I get about £35 per month from current accounts etc (in my sole name) - so fortunately that's under £500 a year limit - so regardless where I stand tax bracket wise - until now its been kind of irrelevant.

If either you or your wife receive Child Benefit then taxable interest of £500 will add 5% to the HICBC despite the interest being taxed at 0%.

Just_A_Dad

HCIMbtw said:

Are you using you full £20k ISA allowance? 

If not could just move some of your savings into an ISA and then no tax payable on any of the interest

Thanks - at present no - because there hasn't been any need too (and also our savings were getting a better rate in the saving accounts rather than any ISA - I shall take a look at this

Just_A_Dad

Dazed_and_C0nfused said:

Currently I get about £35 per month from current accounts etc (in my sole name) - so fortunately that's under £500 a year limit - so regardless where I stand tax bracket wise - until now its been kind of irrelevant.

If either you or your wife receive Child Benefit then taxable interest of £500 will add 5% to the HICBC despite the interest being taxed at 0%.

Hi there,
Yes we have a Child benefit payment monthly to us, although I'm sorry i don't understand what you write after than part or what it means to any tax free alllowance we have.

Albermarle

Just_A_Dad said:

HCIMbtw said:

Are you using you full £20k ISA allowance? 

If not could just move some of your savings into an ISA and then no tax payable on any of the interest

Thanks - at present no - because there hasn't been any need too (and also our savings were getting a better rate in the saving accounts rather than any ISA - I shall take a look at this

Normally the better interest rate in a non ISA account, compensates for any tax to pay if you are a 20% taxpayer. However at 40% you will almost for sure be better off with at least some savings inside an ISA.

If you are contributing to a pension, then some of this will now get 40% tax relief. You may need to claim some of this back depending on what kind of pension and how the contributions are made.

Dazed_and_C0nfused

Just_A_Dad said:

Dazed_and_C0nfused said:

Currently I get about £35 per month from current accounts etc (in my sole name) - so fortunately that's under £500 a year limit - so regardless where I stand tax bracket wise - until now its been kind of irrelevant.

If either you or your wife receive Child Benefit then taxable interest of £500 will add 5% to the HICBC despite the interest being taxed at 0%.

Hi there,
Yes we have a Child benefit payment monthly to us, although I'm sorry i don't understand what you write after than part or what it means to any tax free alllowance we have.

There is no tax free amount for interest.

There is a 0% tax rate which applies to interest, confusingly called the Personal Savings Allowance.

So if you are a higher rate taxpayer and you have £500 of taxable interest you are taxed at 0% on this £500 but it is still part of your adjusted net income, which is what determines the High Income Child Benefit Charge.

Basically having £500 taxable interest means your tax bill (including HICBC) will be larger.

Just_A_Dad

Dazed_and_C0nfused said:

Just_A_Dad said:

Dazed_and_C0nfused said:

Currently I get about £35 per month from current accounts etc (in my sole name) - so fortunately that's under £500 a year limit - so regardless where I stand tax bracket wise - until now its been kind of irrelevant.

If either you or your wife receive Child Benefit then taxable interest of £500 will add 5% to the HICBC despite the interest being taxed at 0%.

Hi there,
Yes we have a Child benefit payment monthly to us, although I'm sorry i don't understand what you write after than part or what it means to any tax free alllowance we have.

There is no tax free amount for interest.

There is a 0% tax rate which applies to interest, confusingly called the Personal Savings Allowance.

So if you are a higher rate taxpayer and you have £500 of taxable interest you are taxed at 0% on this £500 but it is still part of your adjusted net income, which is what determines the High Income Child Benefit Charge.

Basically having £500 taxable interest means your tax bill (including HICBC) will be larger.

Thanks - looking into it - and doing the calculator on the gov website -  this year I am just under the HICBC limit - so fortunately this year no tax to pay - but something to be aware of going forwards if wages or CC BIK rises (although I don't fully understand why CC BIK value is part of an income - as already paying out TAX on that)..