Tax on Interest from Savings. A few questions if anyone can help please?

Tunstallstoven

So based on that....

- If the wife has £15,000 total income, all from a job, Marriage Allowance wouldn't apply or be relevant as we'd both be earning into the taxable bracket (i.e. above our PAs).  (Side note, if that were the case, what would we do?  Inform HMRC that the wife's earnings from employment are now too high?  Or would it all happen automatically?  Would her tax code change back to 1257?)

- If the wife has £15,000 total income, £10,000 from a job and £5,000 from savings interest, things would remain as they are and her tax code stay at 1130?

Tunstallstoven

I should add - I do apologise for dragging you all through this!  I'll get it clear in my head eventually, I promise!

Dazed_and_C0nfused

Tunstallstoven said:

So based on that....

- If the wife has £15,000 total income, all from a job, Marriage Allowance wouldn't apply or be relevant as we'd both be earning into the taxable bracket (i.e. above our PAs).  (Side note, if that were the case, what would we do?  Inform HMRC that the wife's earnings from employment are now too high?  Or would it all happen automatically?  Would her tax code change back to 1257?)

- If the wife has £15,000 total income, £10,000 from a job and £5,000 from savings interest, things would remain as they are and her tax code stay at 1130?

Nothing would happen.  If neither of you are higher rate payers then you are eligible.

You just wouldn't benefit.  You would save £252 and your wife would pay £252 more than she strictly needs to.

You/she could choose to cancel it, that's your choice to make.

In the second scenario your wife's tax code is going to change as the interest will use her spare Personal Allowance.

So at some point expect it to become 1000N.

Personal Allowance 11,310 less untaxed interest 1,310 = tax code allowances 10000.

Tunstallstoven

Thanks @Dazed_and_C0nfused I really appreciate it.  

One last question for arguments sake if I may please....  

Now let's say the wife has £20,000 total income, £10,000 from a job and £10,000 from savings interest.  Marriage allowance in place so tax code 1130.  Is this right for how it would work:

£11,310 PA
£5,000 Starting Rate for Savings 
£1,000 PSA
TOTALS  £17,310

No tax would be due from the job.  
20% tax would be due on £2,690 on the savings interest?  

Based on previous form I'm thinking that won't be right, but there's a first time for everything!!!

Dazed_and_C0nfused

Tunstallstoven said:

Thanks @Dazed_and_C0nfused I really appreciate it.  

One last question for arguments sake if I may please....  

Now let's say the wife has £20,000 total income, £10,000 from a job and £10,000 from savings interest.  Marriage allowance in place so tax code 1130.  Is this right for how it would work:

£11,310 PA
£5,000 Starting Rate for Savings 
£1,000 PSA
TOTALS  £17,310

No tax would be due from the job.  
20% tax would be due on £2,690 on the savings interest?  

Based on previous form I'm thinking that won't be right, but there's a first time for everything!!!

Yes it's correct.  But she would have to complete a Self Assessment return, even if the correct tax was paid under PAYE.

Interest of £10,000 or more is one of the criteria HMRC for Self Assessment

Tunstallstoven

Dazed_and_C0nfused said:

Yes it's correct. 

 At last!!!  Well at least that's one notch in three pages!

Dazed_and_C0nfused said:

Interest of £10,000 or more is one of the criteria HMRC for Self Assessment

Unfortunately the figures are all hypothetical, which is a shame as £10k in interest would be rather nice! 

But just to know (or for anyone more fortunate reading this in the future) - £9,999 in interest and no Self Assessment needed?  

Dazed_and_C0nfused

Tunstallstoven said:

Dazed_and_C0nfused said:

Yes it's correct. 

 At last!!!  Well at least that's one notch in three pages!

Dazed_and_C0nfused said:

Interest of £10,000 or more is one of the criteria HMRC for Self Assessment

Unfortunately the figures are all hypothetical, which is a shame as £10k in interest would be rather nice! 

But just to know (or for anyone more fortunate reading this in the future) - £9,999 in interest and no Self Assessment needed?  

Yes.  Unless any other criteria apply of course!

sparkyspark

Thanks for this thread, also confused initially until explained above. I assume that my wife's following scenario is the same if you guy's could confirm:
Her Personal Allowance of £11310.00
Her State Pension £7208.00
Her Total Savings Interest £7650.00
Giving Her a Total Income of £14858.00
Am I right that there is no tax liability due, as the first £6000 is covered by her Personal and Starting Rate for Savings Allowances and the extra Savings Interest of £1650.00 is covered by the rest of her Personal Allowance shortfall.

Dazed_and_C0nfused

sparkyspark said:

Thanks for this thread, also confused initially until explained above. I assume that my wife's following scenario is the same if you guy's could confirm:
Her Personal Allowance of £11310.00
Her State Pension £7208.00
Her Total Savings Interest £7650.00
Giving Her a Total Income of £14858.00
Am I right that there is no tax liability due, as the first £6000 is covered by her Personal and Starting Rate for Savings Allowances and the extra Savings Interest of £1650.00 is covered by the rest of her Personal Allowance shortfall.

Not quite, you've got it the wrong way round.  She cannot benefit from the savings nil rate band (aka PSA).

The interest will be dealt with as follows,
£4,102 covered by Personal Allowance

£3,548 taxed at 0% (savings starter rate)

sparkyspark

Dazed_and_C0nfused said:

Not quite, you've got it the wrong way round.  She cannot benefit from the savings nil rate band (aka PSA).

The interest will be dealt with as follows,
£4,102 covered by Personal Allowance

£3,548 taxed at 0% (savings starter rate)

I thought that if the only income is her State Pension of £7208 and because she's under her £11310 Personal Allowance, she then qualifies for the full £6000 Savings Allowance to cover the first £6000 of savings interest totalling £7208, and still has a Personal Allowance shortfall of £4102 to cover the extra interest difference incurred of £1650 if that makes sense?
Quote on Martin Lewis Tax-free savings: check if you're eligible - Money Saving Expert

The amount you have as income – for example, from a job or a pension – affects whether your savings interest is tax-free. Let's take the three main scenarios for non-savings income...

1. You earn less than £12,570. Here it's fairly simple. You benefit from both the £5,000 starting savings allowance – where you pay 0% tax, plus the personal savings allowance of £1,000. So, you can earn a total of £18,570 from income and savings interest without paying any tax.
   
2. What is the £5,000 starting savings rate?If you earn less than £17,570, the starting savings rate allows you to earn up to £5,000 in savings interest completely tax-free. This is in addition to your personal income tax allowance and personal savings allowance.