Savings Tax

nxdmsandkaskdjaqd

I understand you can earn £1000 of interest on a savings account without paying any tax.  If you have no other income, can you earn more than that and not pay tax (up to your personal allowance)? 

Dazed_and_C0nfused

nxdmsandkaskdjaqd said:

I understand you can earn £1000 of interest on a savings account without paying any tax.  If you have no other income, can you earn more than that and not pay tax (up to your personal allowance)? 

Yes.

You have your Personal Allowance, either £11,310 or £12,570 depending on whether you've applied for Marriage Allowance.

Once that has been used you have the savings starter rate band, up to £5,000 of interest taxed at 0%.

And only once that has been used can you then use the savings nil rate band, up to £1,000 interest taxed at 0%.

The savings starter rate band is reduced pound for pound by any non savings non dividend income (taxable earnings, pension, rental income etc) above the Personal Allowance so say you have the standard Personal Allowance of £12,570 and a pension of £14,000 you will pay tax on £1,430 of your pension income and the savings starter rate band will be £3,570, not £5,000.

nxdmsandkaskdjaqd

So you can earn £12,570 + £5000 + £1000, before paying any tax, right?

Dazed_and_C0nfused

nxdmsandkaskdjaqd said:

So you can earn £12,570 + £5000 + £1000, before paying any tax, right?

In interest yes, if you have absolutely no other taxable income whatsoever.

pedrodelgado

Unless Sunak and Hunt have any other ideas.

DE_612183

how does it work if you have a joint savings account, and one person has no income, and the other is higher tax bracket?

Dazed_and_C0nfused

DE_612183 said:

how does it work if you have a joint savings account, and one person has no income, and the other is higher tax bracket?

Each person is deemed to have 50% of the interest.

And is then taxed based on their overall tax position including the interest.

So in a very simple scenario a higher rate payer will have £500 taxed at 0% and then everything above that is taxed at 40%.

The interest will use some of the person with no income's Personal Allowance.

[Deleted User]

Hi,

don't know, but best to to use a 'no income account'.

blueste

My wife pays the higher rate of Income tax, I pay zero income tax as my earnings are non-taxable and I do not receive a pension. All of the savings accounts are in my sole name, do I (we) receive the full £12,570 + £5000 + £1000 in tax free savings?

RobertWBattye

In the weekly newsletter it is stated that a person could have £20,600 in the top paying 2 year fix at 4.85% before paying tax (ie produces £999 interest PER YEAR) 
But if there is no access to the interest before maturity interest received is:- Year1 Nil, Year 2 £1998 with tax payable on the amount above £1000.
HMRC document states "Interest ‘arises’ when it is received or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw"

eskbanker

frugalmacdugal said:

Hi,

don't know, but best to to use a 'no income account'.

You might want to have another go at that post, because it doesn't make any sense as it stands?