Bank interest tax question

User49494

If eg, i have 0 income but 2k in interest how much tax would i pay on the interest, assuming that was all on the Self Assessment £0 or £200?

Basically if all im living on is interest payments of 2k (as an examnple) wounld it be tax free as im within my tax free allowance? I know PSA is only 1k interest free.

eskbanker

Yes, savings interest uses any unused personal tax allowance (£12,570) before the subsequent 'allowances' come into play, so if your only income is from savings interest then you can receive up to £18,570 before paying tax.

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

molerat

Why would you be self assessing with £0 income ?  Interest is taxable income the same as anything else but can come with favourable tax rates in certain circumstances.  If that £2K is you ONLY income then it would not be taxed as it falls within your personal allowance.

User49494

molerat said:

Why would you be self assessing with £0 income ?  Interest is taxable income the same as anything else but can come with favourable tax rates in certain circumstances.  If that £2K is you ONLY income then it would not be taxed as it falls within your personal allowance.

I have to fill out SA because of CGT. And you have to declare interest above 1k right? Next year this might be the situation. 

Good to know I can earn upto 18570 interest free. It won’t be that high (I wish) but good it works the way I thought. 

User49494

And helps me decide if I needed an ISA or not. I don’t. 

eskbanker

User49494 said:
And you have to declare interest above 1k right?

Wrong!  If you're already self-assessing, you have to declare all interest (except from ISAs), even if it ultimately doesn't result in tax being payable....

ColdIron

User49494 said:

molerat said:

Why would you be self assessing with £0 income ?  Interest is taxable income the same as anything else but can come with favourable tax rates in certain circumstances.  If that £2K is you ONLY income then it would not be taxed as it falls within your personal allowance.

I have to fill out SA because of CGT

A quick sanity check. If you are hazy on the allowances for interest are you aware that there is a similar 'allowance' (the Annual Exempt Amount) for CGT? (NB this is decreasing to £6,000 2023/24 and £3,000 2024/25)

https://www.gov.uk/capital-gains-tax/allowances

If your gain is less than £12,300 there is no tax to pay and if the total sale amount is less than £49,200 you may not even need to report it

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

User49494

I am aware of CGT allowances 😢. Have been filing for 4 years. I also know you have to declare all interest. I was asking in a simple way just to clarify as I want to open fixed rate savings accounts and wondered if I would be taxed. In the past I’ve declared more than 1k tax but just didn’t make a mental note of how it was taxed. I thought it was the way it’s been confirmed. That’s all. Thanks.