How much tax do I need to pay

sultan123

Currently have a savings account and earning interest monthly on my money. Getting £9.99 a month started the account last month. 8 months to next tax year would be around £80 in interest.

I earn around 95k a year. 

How much tax would I pay on my savings interest? 40%?

Bigwheels1111

Don’t you get the first £500 tax free.

Dazed_and_C0nfused

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

sultan123

Dazed_and_C0nfused said:

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

Might be a silly question so sorry to ask but would I be left with £40-16 = £24 take home?

Also why would my net income fall to 100k? And where is 20% coming from

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

Might be a silly question so sorry to ask but would I be left with £40-16 = £24 take home?

Also why would my net income fall to 100k? And where is 20% coming from

You would be left with £24 if the interest meant you had a reduced Personal Allowance.

I didn't mean your adjusted net income (ANI) would reduce (fall) but this will happen when it's in the range from £100-£125k.

Let's say your ANI is £100,000.  This means you get a full Personal Allowance of £12,570 and pay tax on £87,430.

But if you have (taxable) interest of £80 your adjusted net income is £100,080.  And this means you are subject to the tapered Personal Allowance.  For every £2 above £100,000 you lose £1 of your Personal Allowance.

So ANI of £100,080 = Personal Allowance of £12,530 which means an extra £40 of your earnings are taxed at 40%.

£40 x 40% = £16.

£16 is 20% of £80.  

The £80 interest is taxed at 0% but your overall tax liability has increased by £16.

None of which will happen until your adjusted net income (which includes any taxable interest) exceeds £100k.  But you are already quite close to that amount.

MX5huggy

Not “fall to” but “falls in” your salary ends up being in the range £110 to £125k

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

Might be a silly question so sorry to ask but would I be left with £40-16 = £24 take home?

Also why would my net income fall to 100k? And where is 20% coming from

You would be left with £24 if the interest meant you had a reduced Personal Allowance.

I didn't mean your adjusted net income (ANI) would reduce (fall) but this will happen when it's in the range from £100-£125k.

Let's say your ANI is £100,000.  This means you get a full Personal Allowance of £12,570 and pay tax on £87,430.

But if you have (taxable) interest of £80 your adjusted net income is £100,080.  And this means you are subject to the tapered Personal Allowance.  For every £2 above £100,000 you lose £1 of your Personal Allowance.

So ANI of £100,080 = Personal Allowance of £12,530 which means an extra £40 of your earnings are taxed at 40%.

£40 x 40% = £16.

£16 is 20% of £80.  

The £80 interest is taxed at 0% but your overall tax liability has increased by £16.

None of which will happen until your adjusted net income (which includes any taxable interest) exceeds £100k.  But you are already quite close to that amount.

thank you but what if my overall income does not fall within 100k

let us say I make 95k + £80 interest. My overall income would be £95080. As £500 savings free, guessing I would then pay nothing on the £80?

Eco_Miser

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

Might be a silly question so sorry to ask but would I be left with £40-16 = £24 take home?

Also why would my net income fall to 100k? And where is 20% coming from

You would be left with £24 if the interest meant you had a reduced Personal Allowance.

I didn't mean your adjusted net income (ANI) would reduce (fall) but this will happen when it's in the range from £100-£125k.

Let's say your ANI is £100,000.  This means you get a full Personal Allowance of £12,570 and pay tax on £87,430.

But if you have (taxable) interest of £80 your adjusted net income is £100,080.  And this means you are subject to the tapered Personal Allowance.  For every £2 above £100,000 you lose £1 of your Personal Allowance.

So ANI of £100,080 = Personal Allowance of £12,530 which means an extra £40 of your earnings are taxed at 40%.

£40 x 40% = £16.

£16 is 20% of £80.  

The £80 interest is taxed at 0% but your overall tax liability has increased by £16.

None of which will happen until your adjusted net income (which includes any taxable interest) exceeds £100k.  But you are already quite close to that amount.

thank you but what if my overall income does not fall within 100k

let us say I make 95k + £80 interest. My overall income would be £95080. As £500 savings free, guessing I would then pay nothing on the £80?

Yes, as was stated in the first two replies.
Dazed_and_C0nfused was warning you that with just a 5k rise, the calculation gets more complicated - still zero tax on the interest, but less Personal Allowance, so more tax.

[Deleted User]

Hi,

if earning £95k a year, does £9.99 a month really make a big difference?

Albermarle

frugalmacdugal said:

Hi,

if earning £95k a year, does £9.99 a month really make a big difference?

Exactly what I was thinking. Hopefully the OP is not concentrating too much on minor issues like this and is making sure their pension is nice and full up etc 

sultan123

Eco_Miser said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

Nothing as the first £500 is taxed at 0%.

But if your adjusted net income eventually falls in the £100-£125k range for tapered Personal Allowance you will ultimately pay 20%.

The interest will be taxed at 0% but you would lose £40 of your Personal Allowance (from interest of £80).

Meaning £40 more of your earnings would be taxed at 40% (£40 x 40% = £16)

Might be a silly question so sorry to ask but would I be left with £40-16 = £24 take home?

Also why would my net income fall to 100k? And where is 20% coming from

You would be left with £24 if the interest meant you had a reduced Personal Allowance.

I didn't mean your adjusted net income (ANI) would reduce (fall) but this will happen when it's in the range from £100-£125k.

Let's say your ANI is £100,000.  This means you get a full Personal Allowance of £12,570 and pay tax on £87,430.

But if you have (taxable) interest of £80 your adjusted net income is £100,080.  And this means you are subject to the tapered Personal Allowance.  For every £2 above £100,000 you lose £1 of your Personal Allowance.

So ANI of £100,080 = Personal Allowance of £12,530 which means an extra £40 of your earnings are taxed at 40%.

£40 x 40% = £16.

£16 is 20% of £80.  

The £80 interest is taxed at 0% but your overall tax liability has increased by £16.

None of which will happen until your adjusted net income (which includes any taxable interest) exceeds £100k.  But you are already quite close to that amount.

thank you but what if my overall income does not fall within 100k

let us say I make 95k + £80 interest. My overall income would be £95080. As £500 savings free, guessing I would then pay nothing on the £80?

Yes, as was stated in the first two replies.
Dazed_and_C0nfused was warning you that with just a 5k rise, the calculation gets more complicated - still zero tax on the interest, but less Personal Allowance, so more tax.

less personal allowance if I hit 100k though, not at 95k right?