what is my tax liability on savings

Anni_nOMin_oustwo

Hi everybody. This is my 1st post; I have joined today so please excuse me if people have already covered this issue before. My tax code is 663, I have my state pension of £9796.00 and a private pension of £11184.00. Can anybody explain my tax situation on savings. I simply thought I was permitted £1000 interest before any tax was liable on my savings above this figure. But I think I'm being naive and it's much more complicated than that. I have no idea of what my personal savings allowance is, if any at all. Could some knowledgeable person guide me please. Are all my savings taxable? Currently I do not have an ISA and my savings are tied in fixed rate bonds,
Kind regards in advance

badmemory

Tax liablilities on savings interest of £1000 is zilch unless you earn over £50k.  Tax on income = 9796 + 11184 -12570 * 20% = 1682.  Frankly HMRC rarely get savings interest right so you should check carefully.  I suspect your tax code is not correct.  It should be your personal allowance minus your state pension divided by ten. So 12570 - 9796 /10. which would be more like 278.  So check your none ISA savings.  Your banks will (should) notify them of your savings interest, but I would not trust either of them to get it right

Anni_nOMin_oustwo

Hello badmemory,
 Firstly, thank you for such a fast response. Let me explain further to clarify things. My tax code is that high a figure because my wife has let me transfer the married aspect of her code. My wife can't work because she is severely sight impaired (blind) and has let me have her blind persons allowance transferred to me too, in order to reduce our tax bill. She is not of pension age yet, being one of the women forced to work till 66 instead of 60. Therefore, it makes most sense to let me use it, rather than let it go to waste.
 Now are your figures still applicable to me after the explanation above i.e., am I still allowed £1682 of interest before I need to pay tax? or have I mis-understood your calculation. To be clear we do get more than £1000 interest, it is our life savings we are talking about and hard earned too as a retired manual worker, so I don't want to give a penny back to the state. That £1000 I mentioned in my original post, is what I have seen referenced, that you are allowed £1000 of interest before you have to pay any tax?
I hope this additional information has helped shed more light on the advice you have given me. If I am liable to pay tax on all of our savings, then I would need to use an ISA to offset the tax burden. I calculated for example, a bond paying 3.65% would equate to a 2.92% net figure, if tax was liable on the interest, therefore, any ISA paying more than 2.92% would mean we would be better off opening an ISA when funds became available.
Kind regards

badmemory

Your tax code is looking even more too high than I originally noted ( your wifes transferred amount).  Is she getting PIP?  That won't change your tax due though.  The £1682 is the tax due on income.  But just because there is tax due on income does not mean that there is tax due on interest.  The people who really know will be on later after work.

double_dutchy

If you are a basic rate taxpayer then the personal savings allowance is currently £1,000.

This might help

What is the personal savings allowance? (moneysavingexpert.com)

Dazed_and_C0nfused

double_dutchy said:

If you are a basic rate taxpayer then the personal savings allowance is currently £1,000.

This might help

What is the personal savings allowance? (moneysavingexpert.com)

A basic rate taxpayer could also have upto £4,999 of the savings starter rate available.

Which must be used before the £1,000 savings nil rate.

sheramber

Why do you think you are paying tax on your savings?

Has  your wife transferred marriage tax allowance to you as well as blind person's allowance?

EthicsGradient

The basic principle is that for any basic rate taxpayer, the first £1,000 of savings interest is taxed at 0%.

With your tax code looking high, has there been a significant change in your pension in the past year, eg you took a tax-free lump sum? That can cause HMRC to think that what happened in one month is going to happen again and again, and they make unrealistic projections of what your income will be, which you have to send in a form to correct. I haven't been through this myself, but I think many forum members will be able to advise on this.

Dazed_and_C0nfused

Anni_nOMin_oustwo said:

Hi everybody. This is my 1st post; I have joined today so please excuse me if people have already covered this issue before. My tax code is 663, I have my state pension of £9796.00 and a private pension of £11184.00. Can anybody explain my tax situation on savings. I simply thought I was permitted £1000 interest before any tax was liable on my savings above this figure. But I think I'm being naive and it's much more complicated than that. I have no idea of what my personal savings allowance is, if any at all. Could some knowledgeable person guide me please. Are all my savings taxable? Currently I do not have an ISA and my savings are tied in fixed rate bonds,
Kind regards in advance

I will be able to give you the figures but you need to clarify how your tax code is made up first.

For someone receiving Marriage Allowance with State Pension of £9796 the typical code would be 403M, a big difference from 663(M).

Also, is the £9796 definitely correct?  A common mistake is people multiply their State Pension payment by 12 (monthly) when it should be 12 as it's paid 4 weekly.

Daliah

Dazed_and_C0nfused said:

Also, is the £9796 definitely correct?  A common mistake is people multiply their State Pension payment by 12 (monthly) when it should be 12 as it's paid 4 weekly.

I think you mean it should be 13

Dazed_and_C0nfused

Daliah said:

Dazed_and_C0nfused said:

Also, is the £9796 definitely correct?  A common mistake is people multiply their State Pension payment by 12 (monthly) when it should be 12 as it's paid 4 weekly.

I think you mean it should be 13

Very good point 😳