Tax on savings over £1000 when on a low salary.

vSDNv

I earn around £13K working part time for the NHS. I have cash totalling around £200,000 mainly in various cash ISA with about £50,000 in a Marcus account. If I move this money from the Marcus account to earn more interest elsewhere will I have to pay tax on anything over £1000. I am not concerned about paying the tax, it's the filling out of a tax return that bothers me, Iwouldn't have a clue. 

RobM99

I think you can earn an extra £5,000 tax-free on a low income. No tax return needed as the bank will inform HMRC and adjust the tax code. That's my belief, correct me if I'm wrong!

Bigwheels1111

£12,570 earning or interest is tax free.

£ 5,000 starter interest is tax free.

£ 1,000 savins interest tax free in your case.

Total £18,570 before tax is paid on earnings and interest.

Looking at your earning you could get £5,570 of interes tax free.

Might be worth ditching an isa or 2 to get better returns due to your tax.

At 5% fixed for a few year you could have 100k stashed and not pay tax on it.

Making sure interest is paid annually and away I think it is, thay way tax is done on a year by year basis.

Dazed_and_C0nfused

You cannot use the £1,000 savings nil rate (0%) until you have used both your Personal Allowance and the savings starter rate band (another 0% tax rate).

If your P60 will show taxable pay of £13,000 and you haven't applied for Marriage Allowance it's likely you will have £4,570 of the savings starter rate band to use. 

So until your interest exceeds £5,570 it will all be taxed at 0%.

But if you are in the NHS pension scheme it's likely your taxable pay is actually less than £13,000 - you can check this on your payslips - so you could have more like £6k interest without paying tax on it.

Unless your interest is £10k or more it's all dealt with automatically  by HMRC and you either make a direct payment by 31 January after the end of the tax year or extra tax is deducted by having a lower tax code.

All the above assumes you don't have any other taxable income not previously mentioned.

vSDNv

Thanks for the reply, I've read that about the £5000 but wasn't sure it would apply to me, it sounds too good to be true. Can anyone else confirm?

MX5huggy

You won’t need to do self assessment, but you should not be scared of doing it. 

You logon check 2 or 3 numbers match the numbers on your P60. Then enter total taxable interest received and it calculates the tax and you pay it. 

vSDNv

Thankyou, that's all very helpful, much appreciated. 

[Deleted User]

vSDNv said:

Thanks for the reply, I've read that about the £5000 but wasn't sure it would apply to me, it sounds too good to be true. Can anyone else confirm?

Hi,

here's what dot.Gov SAYS.

ColdIron

You have a Personal Allowance of £12,570 which covers most of your earnings (your employer will deal with the residual £430) and on top of that there is a £5,000 'nil rate' band, the Starting Rate for Savings. Any savings interest that falls between £12,570 and £17,570 will be taxed at 0% so that will easily cover your £1,000+ interest leaving you quite a lot of headroom in that band before even having to consider the £1,000 Personal Savings Allowance you allude to

In short, assuming you have no other income than that in your OP, you are fine and don't need to submit a tax return or pay any tax on your savings interest

Dazed_and_C0nfused

vSDNv said:

Thanks for the reply, I've read that about the £5000 but wasn't sure it would apply to me, it sounds too good to be true. Can anyone else confirm?

Have a read of this.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#how-does-the-starting-rate-for-savings-work

Basically the £5,000 gets reduced by any taxable non savings and non dividend income above your Personal Allowance.

So if you taxable pay was £13,000 and you haven't applied for Marriage Allowance you would normally have used £430 of your basic rate band and this reduces the savings starter rate band from £5,000 to £4,570.

And once that is used you then have the £1,000 savings nil rate band (aka Personal Savings Allowance).

vSDNv

Thanks all, you've all been very helpful, It's all clear to me now.