Low earner query re savings interest and starter savings rate

thomas1942

Hi can anyone clarify? 

Dazed_and_C0nfused

thomas1942 said:

Hi can anyone clarify? 

Have £6000 employment income plus £3500 carers income so 0% tax payer as below personal allowance of £12570
i have read that I am eligible for starter rate for savings. So can earn up to £5000 tax free 
am I also able to use the difference from £9500 to £12570 as savings interest at 0%???
am reading conflicting information which also references a £1000 PSA but though this only would apply to a basic rate taxpayer?
any advice appreciated,

If you have enough income then you can have the lot 😊.

The first £3,070 uses your spare Personal Allowance.

Then you can use the £5,000 savings starter rate band.

And finally you can use the £1,000 savings nil rate band (aka Personal Savings Allowance).

The above assumes you haven't applied for Marriage Allowance.

Dazed_and_C0nfused

thomas1942 said:

Thank you for reply - correct no marriage allowance applied for 

For the benefit of anyone else with a similar situation i.e. non savings non dividend income less than your Personal Allowance, the only difference applying for Marriage Allowance would make is that you would have less spare Personal Allowance to use.

The savings starter and nil rate bands would both still be available in full.

Dazed_and_C0nfused

thomas1942 said:

So if no earnings whatsoever I could earn all the below and still not have to pay any tax?
£12570 from personal allowance
£5000 starter savings rate
£1000 PSA

Yes.  And £2,000 in dividends if you had some unwrapped shares 😃.

But if your interest (or dividends) income is ever £10,000 or more in a tax year you are required to complete a Self Assessment return.  Even if no tax is payable.

Albermarle

thomas1942 said:

So if no earnings whatsoever I could earn all the below and still not have to pay any tax?
£12570 from personal allowance
£5000 starter savings rate
£1000 PSA

Plus you could put £20K pa in a cash ISA per year  and pay no tax on the interest on that either
However if you had that much cash sloshing around ( over half a Million ) then you would be better off with investing the majority of it, unless you needed half a million handy to buy a house for example.

Suzycoll

thomas1942 said:

Hi can anyone clarify? 

Have £6000 employment income plus £3500 carers income so 0% tax payer as below personal allowance of £12570
i have read that I am eligible for starter rate for savings. So can earn up to £5000 tax free 
am I also able to use the difference from £9500 to £12570 as savings interest at 0%???
am reading conflicting information which also references a £1000 PSA but though this only would apply to a basic rate taxpayer?
any advice appreciated,

hi Thomas 
excuse my ignorance - could you say what 'starter rate for savings ' is please ?
thank you in advance 

Dazed_and_C0nfused

Suzycoll said:

thomas1942 said:

Hi can anyone clarify? 

Have £6000 employment income plus £3500 carers income so 0% tax payer as below personal allowance of £12570
i have read that I am eligible for starter rate for savings. So can earn up to £5000 tax free 
am I also able to use the difference from £9500 to £12570 as savings interest at 0%???
am reading conflicting information which also references a £1000 PSA but though this only would apply to a basic rate taxpayer?
any advice appreciated,

hi Thomas 
excuse my ignorance - could you say what 'starter rate for savings ' is please ?
thank you in advance 

It's a tax band/rate just for savings income.

At the moment it allows some people to have interest of upto £5,000 taxed at 0%.

It comes after the Personal Allowance and where available must be used before the savings nil rate band (aka Personal Allowance Savings Allowance).

More detail here,

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#toc-how-does-the-starting-rate-for-savings-work-