My only income is from savings interest - how much can I get tax free? £18,570 or £12,570?

NedS

And if you run out of tax free allowances, you can currently purchase low coupon UK gilts (e.g, TN25, 2 year maturity) at around 4.6% yield to maturity of which 0.25% is paid as a coupon (interest) and the remaining will be achieved as a capital gain at maturity, tax free. Anyone can purchase and hold these in a GIA for free, so a great option if you are likely to pay tax on savings income.

KovaK

NedS said:

And if you run out of tax free allowances, you can currently purchase low coupon UK gilts (e.g, TN25, 2 year maturity) at around 4.6% yield to maturity of which 0.25% is paid as a coupon (interest) and the remaining will be achieved as a capital gain at maturity, tax free. Anyone can purchase and hold these in a GIA for free, so a great option if you are likely to pay tax on savings income.

Thanks everyone, I WAS overthinking it!

Thanks NedS for this suggestion, I'll have to look into it as I've never bought a gilt before!
Do you have to do anything special on your tax return for a gilt or just specify the amount that 0.25% equates to, like any other savings income?

cheers!

NedS

KovaK said:

NedS said:

And if you run out of tax free allowances, you can currently purchase low coupon UK gilts (e.g, TN25, 2 year maturity) at around 4.6% yield to maturity of which 0.25% is paid as a coupon (interest) and the remaining will be achieved as a capital gain at maturity, tax free. Anyone can purchase and hold these in a GIA for free, so a great option if you are likely to pay tax on savings income.

Thanks everyone, I WAS overthinking it!

Thanks NedS for this suggestion, I'll have to look into it as I've never bought a gilt before!
Do you have to do anything special on your tax return for a gilt or just specify the amount that 0.25% equates to, like any other savings income?

cheers!

I've never had to complete a tax return, but I would assume you would just declare the coupon payments as interest income, exactly the same as you would any other interest payments you may have received.

Basically, you are buying TN25 gilt for £90.60 today that will return you £100 face value at maturity on 31/1/2025. Between now and then, you would receive the 0.25% annual coupon (25p interest) payable in 6 monthly instalments. Most of your gain will come from the return of your £100 capital, which only cost you £90.60 to purchase. You do not need to pay any capital gains tax on the gain, as theoretically there is no gain and you are merely being returned the original £100 face value of the bond.

Bigwheels1111

Don’t forget that if you earn over 10k in interest you need to file a tax return.
But if under £18,570 no tax will be taken

masonic

KovaK said:

NedS said:

And if you run out of tax free allowances, you can currently purchase low coupon UK gilts (e.g, TN25, 2 year maturity) at around 4.6% yield to maturity of which 0.25% is paid as a coupon (interest) and the remaining will be achieved as a capital gain at maturity, tax free. Anyone can purchase and hold these in a GIA for free, so a great option if you are likely to pay tax on savings income.

Thanks everyone, I WAS overthinking it!

Thanks NedS for this suggestion, I'll have to look into it as I've never bought a gilt before!
Do you have to do anything special on your tax return for a gilt or just specify the amount that 0.25% equates to, like any other savings income?

cheers!

Nothing special. Gilt interest is just entered into a different box on your return (you'll need to tailor your online return to add that particular section). It's the same box as Peer-to-peer lending interest if you've ever done any of that.

ranciduk

Sorry to hijack someone else’s thread but I have a small query on this kinda topic 

so, soon I will earn nothing - not working at all and not claiming any benefits at all

if I then earn just slightly over £5k in savings interest over the tax year, will I have to pay any tax on it at all?

this whole subject just confuses the hell outta me...

wmb194

ranciduk said:

Sorry to hijack someone else’s thread but I have a small query on this kinda topic 

so, soon I will earn nothing - not working at all and not claiming any benefits at all

if I then earn just slightly over £5k in savings interest over the tax year, will I have to pay any tax on it at all?

this whole subject just confuses the hell outta me...

Assuming you mean literally nothing other than interest, no, as this amount will fall well within your annual personal allowance.

Dazed_and_C0nfused

ranciduk said:

Sorry to hijack someone else’s thread but I have a small query on this kinda topic 

so, soon I will earn nothing - not working at all and not claiming any benefits at all

if I then earn just slightly over £5k in savings interest over the tax year, will I have to pay any tax on it at all?

this whole subject just confuses the hell outta me...

No, in a new tax year you won't even have used half of your Personal Allowance.

If you mean this tax year and have been earning you will need to factor in your taxable earnings from 6 April to when they end.

ranciduk

Brilliant 

thanks mate 👍

KovaK

NedS said:

KovaK said:

NedS said:

And if you run out of tax free allowances, you can currently purchase low coupon UK gilts (e.g, TN25, 2 year maturity) at around 4.6% yield to maturity of which 0.25% is paid as a coupon (interest) and the remaining will be achieved as a capital gain at maturity, tax free. Anyone can purchase and hold these in a GIA for free, so a great option if you are likely to pay tax on savings income.

Thanks everyone, I WAS overthinking it!

Thanks NedS for this suggestion, I'll have to look into it as I've never bought a gilt before!
Do you have to do anything special on your tax return for a gilt or just specify the amount that 0.25% equates to, like any other savings income?

cheers!

I've never had to complete a tax return, but I would assume you would just declare the coupon payments as interest income, exactly the same as you would any other interest payments you may have received.

Basically, you are buying TN25 gilt for £90.60 today that will return you £100 face value at maturity on 31/1/2025. Between now and then, you would receive the 0.25% annual coupon (25p interest) payable in 6 monthly instalments. Most of your gain will come from the return of your £100 capital, which only cost you £90.60 to purchase. You do not need to pay any capital gains tax on the gain, as theoretically there is no gain and you are merely being returned the original £100 face value of the bond.

Thanks everyone for their replies. That really helped.
NedS, thanks for drawing my attention to gilts. I'll do a search for TN25 and go from there! 

Is there any 'risk' associated with gilts?

Why doesn't everyone buy them if ther is no CGT and interest is so low?

Seems a really good way to invest safely to minimise tax on interest!
Thanks for the heads up!