Is savings interest included in calculating your tax band?

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I’m just trying to clarify how savings interest works with relation to tax bands. I understand that as a basic rate payer then there is a £1k allowance on the savings interest and a £500 allowance for the next higher banding.
So eg if earnings are say £35k and total savings interest is £10k then the income after annual allowance and £9k of the savings interest are both taxed at basic rate. No problem.
What would then happen if income remained the same but savings interest doubled to £20k - does this mean that you become a higher rate tax payer because of the interest taking total money in to over the higher rate threshold and the tax free savings allowance reduces to £500? Or is savings interest income still kept separate and you stay treated as basic rate because that is the band earnings are in?
What would then happen if income remained the same but savings interest doubled to £20k - does this mean that you become a higher rate tax payer because of the interest taking total money in to over the higher rate threshold and the tax free savings allowance reduces to £500? Or is savings interest income still kept separate and you stay treated as basic rate because that is the band earnings are in?
Also, just to complicate it what happens if there is also tax free interest from ISAs? I can see it itself remains tax free but is it added to earnings and other savings interest to give total income and the banding done on that?
Hope that’s clear. Thanks.
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The interest, provided it is paid into the tax free container of the ISA does not count towards income for any taxation purposes.
Any money in an ISA and any interest earned in an ISA, has no impact at all on any tax calculations.
ain't Google wonderful?
I am pleased by your assurance it doesn’t though!
Non-taxable income includes that from ISAs and accounts correctly described as tax-free, such as those NS&I ones.
Taxable income includes salaries, pensions, and interest earned from savings accounts (excluding the above). This income is measured against the personal tax allowance but that doesn't make this allowance 'tax-free' as such, even though no tax is payable on income that falls within it....
eg. Income £35k savings interest £16k, higher rate threshold £50271.
If all savings interest added to income then total is £51k - over the higher tax threshold.
which means allowance only £500 leaving £50500 and £229 taxed at higher rate.
So on the basic facts of taxable income of £51,000 (£35k + £16k) the person would be deemed a higher rate payer and get a savings nil rate band of £500.
The threshold for whether the "personal savings allowance" is £500 or £1,000 is if your total income is above the personal allowance £12,570 + basic rate band £37,700 = £50,270
If earned income is £35k, and interest £15,269, then the nil rate band is £1,000, and tax paid is 20% on (50269-12570-1000)=£7,339.80 (or: 0.2*(35000-12570) + 0.2*(15269-1000))
If earned income is £35k, and interest £15,271, the nil rate band is £500. Tax paid on earned income still = 0.2*(35000-12570). Now, 15271-500=£14,771 of savings is taxed at 20%, ie £2,954.20, bringing the total tax to £7,440.20.
So £2 extra savings interest has increased the tax bill by £100.40.
I have a vague feeling I saw something once said they somehow managed to calculate this so there wasn't a sudden jump in tax at this point - but that may have been wishful thinking, and I can find it now.