Tax on savings with low income

htvygtgt5

Good day.

My personal pension makes £8700 a year. I'm to young for state pension. I have 170,000 to invest in a fixed term account at an approximate return of 5%. Making a total yearly income of approximately £17200. Would I be eligible to pay tax. If so how much, considering my income without savings is below the taxable threshold.
Cheers Marc

Dazed_and_C0nfused

If that is your only taxable income then no tax would be payable.

The State Pension would be covered by some of your Personal Allowance leaving the interest to be taxed like this.

£3,870 covered by Personal Allowance

£4,630 x 0% (savings starter rate band)

diystarter7

Dazed_and_C0nfused said:

If that is your only taxable income then no tax would be payable.

The State Pension would be covered by some of your Personal Allowance leaving the interest to be taxed like this.

£3,870 covered by Personal Allowance

£4,630 x 0% (savings starter rate band)

Hi

Even if that money is earned in interest?

My weak understanding of interest on savings is - 1k per year 20% for taxpayers and 500 quid for those that pay 40%.

Id it because the OP is not reaching their tax-free amount with their pensions and savings?

Sorry for being a bit slow.

Keep_pedalling

diystarter7 said:

Dazed_and_C0nfused said:

If that is your only taxable income then no tax would be payable.

The State Pension would be covered by some of your Personal Allowance leaving the interest to be taxed like this.

£3,870 covered by Personal Allowance

£4,630 x 0% (savings starter rate band)

Hi

Even if that money is earned in interest?

My weak understanding of interest on savings is - 1k per year 20% for taxpayers and 500 quid for those that pay 40%.

Id it because the OP is not reaching their tax-free amount with their pensions and savings?

Sorry for being a bit slow.

https://www.gov.uk/apply-tax-free-interest-on-savings

Dazed_and_C0nfused

diystarter7 said:

Dazed_and_C0nfused said:

If that is your only taxable income then no tax would be payable.

The State Pension would be covered by some of your Personal Allowance leaving the interest to be taxed like this.

£3,870 covered by Personal Allowance

£4,630 x 0% (savings starter rate band)

Hi

Even if that money is earned in interest?

My weak understanding of interest on savings is - 1k per year 20% for taxpayers and 500 quid for those that pay 40%.

Id it because the OP is not reaching their tax-free amount with their pensions and savings?

Sorry for being a bit slow.

Sort of.  The op cannot benefit from the savings nil rate (aka Personal Savings Allowance) as that is not something which can be used by people with low income, simply because they don't need it.

You have to use your Personal Allowance first.

Then any savings starter rate band (up to £5,000 taxed at 0%).  If you pay basic rate tax on £5,000 of your taxable non savings non dividend income (wages, pensions, rental income, self employment profits etc) you won't have any savings starter rate band available.

And only then can you use the savings nil rate (aka PSA).

diystarter7

@Dazed_and_C0nfused
Many thanks.

Millyonare

The UK tax system is an absolute mess. Everyone always seems to have a different answer.

A guess is that... £8700 private pension + £8500 savings interest... for £17,200 total... is going to incur £400-1000 tax in 2022. See this Which? tax calculator, here, for example.

If it were me, I'd call the HMRC helpline, asap, and ask them nicely to help guide informally on the calculation. They are often surprisingly helpful.

Not tax advice. Dyor, etc.

eskbanker

Millyonare said:

A guess is that... £8700 private pension + £8500 savings interest... for £17,200 total... is going to incur £400-1000 tax in 2022. See this Which? tax calculator, here, for example.

And that guess would be wrong....

Millyonare said:

The UK tax system is an absolute mess. Everyone always seems to have a different answer.

Not sure you're really in much of a position to be making comments like that when ignoring the previously posted right answer and guessing a wrong one!

Millyonare said:

If it were me, I'd call the HMRC helpline, asap, and ask them nicely to help guide informally on the calculation. They are often surprisingly helpful.

Or (as OP did) post on here and wait for someone who knows what they're talking about to answer correctly (it only took seven minutes on this thread), which can readily be validated against public domain guidance:

https://www.gov.uk/apply-tax-free-interest-on-savings
https://www.moneysavingexpert.com/savings/tax-free-savings/

Dazed_and_C0nfused

Millyonare said:

The UK tax system is an absolute mess. Everyone always seems to have a different answer.

A guess is that... £8700 private pension + £8500 savings interest... for £17,200 total... is going to incur £400-1000 tax in 2022. See this Which? tax calculator, here, for example.

If it were me, I'd call the HMRC helpline, asap, and ask them nicely to help guide informally on the calculation. They are often surprisingly helpful.

Not tax advice. Dyor, etc.

The Which calculator you have linked to includes this statement,

What's your other income during your chosen tax year (April to April)? If you expect to have other income during this tax year - for example from private pensions, rental income or the state pension - include that here. Don't include income from savings and investments.

Maybe dyor a little bit more thoroughly!