Starting rate for savings and pension income, question

TisMeBill

Looking for advice.

 

I have two sources of income, drawdowns from a defined contribution pension scheme and Interest earned on savings.

 

When I take a drawdown of £16,000 from my pension, due to the scheme rules 25% (£4000) is not subject to tax and the remaining £12,000 is taxable.

 

My question is when it comes to calculating my “Starting rate for savings” allowance, do I include the whole £16,000 in the calculation of just the taxable £12,000?

 

Any advice would be greatly appreciated.

Dazed_and_C0nfused

TisMeBill said:

Looking for advice.

 

I have two sources of income, drawdowns from a defined contribution pension scheme and Interest earned on savings.

 

When I take a drawdown of £16,000 from my pension, due to the scheme rules 25% (£4000) is not subject to tax and the remaining £12,000 is taxable.

 

My question is when it comes to calculating my “Starting rate for savings” allowance, do I include the whole £16,000 in the calculation of just the taxable £12,000?

 

Any advice would be greatly appreciated.

You are overcomplicating things.

A 25% TFLS does exactly what it says on the tin.  It's tax free.  HMRC aren't interested in it and it may well not even be reported to them.

If you haven't applied for Marriage Allowance and have no other non savings non dividend income then you can have £6,570 on interest before any tax would be payable on it.

£570 - covered by spare Personal Allowance then

£5,000 savings starter rate (taxed at 0%) then

£1,000 savings nil rate (taxed at 0%)