interrest on savings

unsureforsure

If I get £7000 a year in my pension and no other income, how much interest can I earn on my savings before I have to pay tax on it? I know I'm allowed £1000 before i pay tax, but because me income is under the £12570 or what ever it is. can I use the difference to earn extra tax free interest on my savings.?

EthicsGradient

If you are not giving the Marriage Allowance to your spouse, you can get up to £11,570 in interest before you pay tax on it - the £5,570 remaining in the personal allowance, £5,000 which is taxed as 0%, for those whose earned income and/or pension is below £12,570, and the £1,000 Personal Savings Allowance. If you do give the Marriage Allowance to your spouse, your Personal Allowance would be reduced by that (£1,260).

Albermarle

Tax-free savings: check if you're eligible - Money Saving Expert

unsureforsure

so is it 20% of 5570 I can I earn so 1114 plus the 1000 savings Allowance before I pay tax?

Dazed_and_C0nfused

unsureforsure said:

so is it 20% of 5570 I can I earn so 1114 plus the 1000 savings Allowance before I pay tax?

No, it's £11,570

£5,570 spare Personal Allowance
£5,000 savings starter rate band (taxed at 0%)
£1,000 savings nil rate band (taxed at 0%)

Zanderman

To explain, if you’re not grasping this OP:

Yes, you’re 5570 below the personal allowance (assuming it’s not been raised or lowered by the marriage allowance scheme). So you can earn 5570 in interest before being taxed on that.  (no it’s not 20% of that, that’s the tax rate, and you’re not being taxed - so it’s the whole 5570.)

PLUS, as a basic tax rate payer (nominally, though you’re not actually paying any!) you get the 1000 savings nil rate tax band (aka Personal Savings Allowance PSA).  So that’s another 1000 you can earn in interest  without paying tax.

PLUS, since you earn less than 12570 you’re eligible for the full 5000 of the Starting Rate for Savings (SR) which applies to anyone earning less than 17570 on a sliding scale of up to 5000.  If you earn less than 12750 (which you do) you get the whole allowance, so that’s another 5000 you can earn in interest without paying tax.

Adding up to a massive 11570 that you could earn in interest and still be free of income tax.  

At an interest rate of, say, 3% you’d have to have savings in excess of £385,000 to earn that much interest , so I suspect it’s not going to be a problem.

unsureforsure

so I so I would be better transferring the married part of my allowance over to my wife? Thank you for dumbing things down for me 

xylophone

See https://forums.moneysavingexpert.com/discussion/comment/79898713/#Comment_79898713

and read both links.