Personal tax allowance on savings interest 24 November 2022 at 11:18AM in Savings & investments 11 replies 653 views

Idiot_Savant

We have a substantial cash figure across our accounts (non isa, mid 6 figure).

We are not working and living off our savings. Neither of us are collecting pensions of any kind. 

How will this affect how much tax we are due to pay on our savings? Can we use our tax free allowance of £12,570 to offset any tax on interest over the £1k threshold? 

Hope this makes sense. Thanks in advance. 

RobM99

You should get 12570+1000 at least. I also think you get £5,000 on top.
Over that, a cash ISA might be a good idea.

I'm sure an expert will appear here in a short while!

PeskyBlunder

Have a read about the starting savings rate here:

https://www.moneysavingexpert.com/savings/tax-free-savings/

Albermarle

Tax on savings with low income — MoneySavingExpert Forum
Tax on savings — MoneySavingExpert Forum
Tax-free savings: check if you're eligible - Money Saving Expert
Tax on savings interest — MoneySavingExpert Forum
State Pension Tax on Savings? — MoneySavingExpert Forum

Idiot_Savant

RobM99 said:

You should get 12570+1000 at least. I also think you get £5,000 on top.
Over that, a cash ISA might be a good idea.

I'm sure an expert will appear here in a short while!

Thank you very much for replying, and thanks for the information. Sadly (or not so sadly) my isa allowance will be used up over the next few years with moving some investments to isa. 

Idiot_Savant

PeskyBlunder said:

Have a read about the starting savings rate here:

https://www.moneysavingexpert.com/savings/tax-free-savings/

Excellent, thank you. 

Idiot_Savant

Albermarle said:

Tax on savings with low income — MoneySavingExpert Forum
Tax on savings — MoneySavingExpert Forum
Tax-free savings: check if you're eligible - Money Saving Expert
Tax on savings interest — MoneySavingExpert Forum
State Pension Tax on Savings? — MoneySavingExpert Forum

Wow, all of that on mse - I must learn how to properly use the search function without generating 22,541 finds. Thanks very much. 

Dazed_and_C0nfused

Idiot_Savant said:

We have a substantial cash figure across our accounts (non isa, mid 6 figure).

We are not working and living off our savings. Neither of us are collecting pensions of any kind. 

How will this affect how much tax we are due to pay on our savings? Can we use our tax free allowance of £12,570 to offset any tax on interest over the £1k threshold? 

Hope this makes sense. Thanks in advance. 

You have some things the wrong way round.

You have to use your Personal Allowance (£11,310 or £12,570) first.

Then any available savings starter rate band (upto £5,000 taxed at 0%)

And only once that has been used (if available) can you use the savings nil rate band (aka PSA).

Albermarle

Idiot_Savant said:

Albermarle said:

Tax on savings with low income — MoneySavingExpert Forum
Tax on savings — MoneySavingExpert Forum
Tax-free savings: check if you're eligible - Money Saving Expert
Tax on savings interest — MoneySavingExpert Forum
State Pension Tax on Savings? — MoneySavingExpert Forum

Wow, all of that on mse - I must learn how to properly use the search function without generating 22,541 finds. Thanks very much. 

The search function is not very good, but questions about savings and taxes are coming a few times a week, so you just need to scroll through the forum and /or read it regularly for any issues about ISA rules, tax, investing etc .

jimjames

Idiot_Savant said:

RobM99 said:

You should get 12570+1000 at least. I also think you get £5,000 on top.
Over that, a cash ISA might be a good idea.

I'm sure an expert will appear here in a short while!

Thank you very much for replying, and thanks for the information. Sadly (or not so sadly) my isa allowance will be used up over the next few years with moving some investments to isa. 

I was going to suggest that holding that much cash long term is quite a risk against inflation but it sounds like you have investments as well so that might not be such an issue. ISAs are definitely more use for investments as you are protecting against capital gains tax as well as income tax.

enthusiasticsaver

Idiot_Savant said:

We have a substantial cash figure across our accounts (non isa, mid 6 figure).

We are not working and living off our savings. Neither of us are collecting pensions of any kind. 

How will this affect how much tax we are due to pay on our savings? Can we use our tax free allowance of £12,570 to offset any tax on interest over the £1k threshold? 

Hope this makes sense. Thanks in advance. 

If you are non taxpayers you use the Personal allowance first then the starter savings allowance of £5000.  So you  can earn up to £17570 in interest before paying tax.