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

ColdIron

RobM99 said:

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!

You asked, so I will

HMRC will be informed but as there is no tax payable there is no need to change the tax code

Albermarle

vSDNv said:

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. 

To digress a little, that is a huge amount of cash to be holding. Is it all in cash for a particular reason (to buy a property for example) ? If you are not needing the majority of it in the short/medium term, you should be looking to invest some of it for the long term.

vSDNv

To digress a little, that is a huge amount of cash to be holding. Is it all in cash for a particular reason (to buy a property for example) ? If you are not needing the majority of it in the short/medium term, you should be looking to invest some of it for the long term.

I am aware it's probably too much cash. Mainly due to getting (probably) bad financial advice when I was younger and a dislike of risk I have always put off seeing a financial advisor. My plan was just work hard and stick it all in Cash ISAs. 

eskbanker

vSDNv said:

To digress a little, that is a huge amount of cash to be holding. Is it all in cash for a particular reason (to buy a property for example) ? If you are not needing the majority of it in the short/medium term, you should be looking to invest some of it for the long term.

I am aware it's probably too much cash. Mainly due to getting (probably) bad financial advice when I was younger and a dislike of risk I have always put off seeing a financial advisor. My plan was just work hard and stick it all in Cash ISAs. 

To reiterate a point often made on here, it's a myth that saving doesn't entail risk - the risks are different ones from those associated with investing but they're still present, with inflation risk being the most obvious one, i.e. the risk that your money will lose real-terms value even if its nominal capital value is preserved....

Albermarle

vSDNv said:

To digress a little, that is a huge amount of cash to be holding. Is it all in cash for a particular reason (to buy a property for example) ? If you are not needing the majority of it in the short/medium term, you should be looking to invest some of it for the long term.

I am aware it's probably too much cash. Mainly due to getting (probably) bad financial advice when I was younger and a dislike of risk I have always put off seeing a financial advisor. My plan was just work hard and stick it all in Cash ISAs. 

To add to eskbankers comments, there is a saying that is relevant to your situation.

'To take no risks, is the biggest risk of all' 

We hesitate to give specific advice on the forum, but I think it can safely be said that holding all your money in cash savings for a prolonged period of time, is almost certainly going to turn out to be a bad decision. Unless maybe you are close to retirement and looking to buy an annuity soon.

Also there is no specific need to see a financial advisor to start investing. It can be a good idea for some, but many posters on here are DIY investors, and most have learnt the basics by reading/googling and to some extent by reading these forums. Also many of us keep substantial cash savings as well as investments. It does not have to be all or nothing.

vSDNv

I'm 53, so still got a few years to go. No debts, mortgage paid and maybe 175K in various pensions. Thanks for your advice I'll give it some thought.

Albermarle

vSDNv said:

I'm 53, so still got a few years to go. No debts, mortgage paid and maybe 175K in various pensions. Thanks for your advice I'll give it some thought.

Often contributing more to a pension is the best way due to the tax relief.

vSDNv

When I was working full time I paid in 25% of my pay for the last couple of years before being made redundant. Now working part time, as I barely pay any tax I wasn't sure I would benefit from any tax relief.

Dazed_and_C0nfused

vSDNv said:

When I was working full time I paid in 25% of my pay for the last couple of years before being made redundant. Now working part time, as I barely pay any tax I wasn't sure I would benefit from any tax relief.

You might not immediately benefit much if your employer operates net pay method but with relief at source contributions there is no link between the tax you pay (or don't pay) and the tax relief you can receive.

You are limited by your earnings for pension purposes but say your part time work was £8,000/year (taxable pay figure) then you could contribute £8,000 to a pension.

If you paid £6,400 (net) to a scheme operating relief at source such as a SIPP or personal pension then the pension company would add £1,600 in basic rate tax relief making a gross contribution of £8,000.  That happens even if you don't pay any tax on the £8,000.

If you earn less than £3,600 you are limited to £3,600 (gross).

The above assumes MPAA hasn't been triggered.

vSDNv

Dazed_and_C0nfused said:

You are limited by your earnings for pension purposes but say your part time work was £8,000/year (taxable pay figure) then you could contribute £8,000 to a pension.

If you paid £6,400 (net) to a scheme operating relief at source such as a SIPP or personal pension then the pension company would add £1,600 in basic rate tax relief making a gross contribution of £8,000.  That happens even if you don't pay any tax on the £8,000.

Thats good to know. It's not something I can see myself dealing with though, I'll have to ask around regarding financial advisor recommendations.