Starting rate

Silverbird65

Hi sorry to be mentioning this topic again but I am totally confused. Spoke to tax who said 5000 interest starting rate my income is well under 12570 and yet the young man said any income over 12570 including interest needs to be taxed? Totally confused now. As I have savings of 2700. They will insist adding it to my total and then tax my small pension. Then I expect I have to claim it back at the end of the tax year. Is that madness? 

Dazed_and_C0nfused

Tax is really all about the detail.

I suspect you and HMRC have confused each other!

How much will your taxable non savings non dividend income be?  Basically taxable pension income (including State Pension) earnings, rental income or self employment profits?

Silverbird65

It's SP 705 per month and 104 per month small pension.

Dazed_and_C0nfused

State Pension isn't paid monthly, do you mean £705 every 4 weeks?

Silverbird65

Sorry every 4 weeks.

[Deleted User]

Silverbird65 said:

Sorry every 4 weeks.

You state that you have savings of £2700 - surely the interest that you receive is minimal?

Dazed_and_C0nfused

Silverbird65 said:

Sorry every 4 weeks.

So it looks like your pension income is £10,413 so you could have the following interest before having to pay any tax on it,

£897 (unused Personal Allowance) plus

£5,000 savings starter rate band plus

£1,000 savings nil rate band

The above assumes you have applied for Marriage Allowance and have a reduced Personal Allowance of £11,310.

And the triple lock SP increase from April 2023 will significantly reduce the interest that can be received without paying tax on it

Silverbird65

Yes but the officer I spoke to said this is added on the income then I am over PA and they change the tax code on my mini pension . So what's the point off starting rate?

molerat

They will only set interest against your tax code if you have allowance spare, tax will not be deducted from your pension as long as your code stays above 124. Your remaining tax free amount would be £3405 after deduction of the state pension so leaving you £2157 allowance not used by your other pension and for HMRC to set against interest. It is one of those totally pointless exercises HMRC seem to carry out and causes countless phone queries on an already stretched service.

[Deleted User]

Dazed_and_C0nfused said:

Silverbird65 said:

Sorry every 4 weeks.

So it looks like your pension income is £10,413 so you could have the following interest before having to pay any tax on it,

£897 (unused Personal Allowance) plus

£5,000 savings starter rate band plus

£1,000 savings nil rate band

The above assumes you have applied for Marriage Allowance and have a reduced Personal Allowance of £11,310.

And the triple lock SP increase from April 2023 will significantly reduce the interest that can be received without paying tax on it

If it is the case that the op has savings of £2700, they would do well to get £100 interest. Unless, they meant to say £2700 interest, of course.

Dazed_and_C0nfused

Silverbird65 said:

Yes but the officer I spoke to said this is added on the income then I am over PA and they change the tax code on my mini pension . So what's the point off starting rate?

Whoever you spoke to has told you some utter garbage.

(Non ISA) savings interest is part of your taxable income.

But it won't make you pay tax unnecessarily.

As @molerat explains if you have some unused Personal Allowance your tax code will be reduced to reflect the fact that the interest has used some of your Personal Allowances.  

But as long as your tax code is 126N (or L) or higher you won't pay tax on your pension.