Personal Savings Allowance for non tax payer

satkin2

Hello MSE forum,
 I’m hoping you can clarify the savings allowance rules for me.
 If a person is a non tax payer, with just pension as their income, is the maximum non-taxed interest from savings accounts still the £1,000 like a basic rate tax payer?
Also, how is this determined, if for example a person has two savings accounts, both earning £505 interest in the year.
 Thank you

allegro120

In this scenario, if the pension is less than £12,570 per year, you can earn up to £6,000 in savings interest tax-free.

It doesn't matter how many savings accounts you have, but how much interest you have received in total during the tax year.

satkin2

Fantastic, thank you @allegro120.

Aristotle67

Your pension will be taxable like any other income; you say "non-tax payer" but I assume that means you are a tax payer but the amount you receive by way of pension is below the personal tax allowance of £12,570 meaning that you don't lose any of it to tax?

Your allowance should be the personal tax allowance of £12,570, the savings starter allowance of £5000 and the personal savings allowance of £1000 making £18,570 in total before you are liable to pay tax on a combination of pension and interest. However, if your pension income were to exceed the £12,570 personal tax allowance then anything over would be taxable. 

Details of interest payments are sent to HMRC by your providers at the end of the financial year. HMRC will determine how much tax, if any, is due based on your income from pension and total interest. 

Aristotle67

allegro120 said:

In this scenario, if the pension is less than £12,570 per year, you can earn up to £6,000 in savings interest tax-free.

It doesn't matter how many savings accounts you have, but how much interest you have received in total during the tax year.

I believe the OP can also utilise the difference between his pension and the £12,570 personal allowance, so if his pension is below this amount he can earn more than £6000 worth of interest tax free. 

22225

Sorry to jump on this thread..
 For child benefit purposes, I assume interest on savings is added on to your income when working out your 'adjusted taxable income' but is it the case that savings interest even from ISAs is also added on in terms of calculating your adjusted taxable income?

MX5huggy

22225 said:

Sorry to jump on this thread..
 For child benefit purposes, I assume interest on savings is added on to your income when working out your 'adjusted taxable income' but is it the case that savings interest even from ISAs is also added on in terms of calculating your adjusted taxable income?

No, ISA interest is not considered for tax or adjusted net income. If you are hitting the Child Benefit  charge it can be avoided by making pension contributions https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/

xylophone

See calculator here. https://www.gov.uk/child-benefit-tax-calculator

Income from ISAs is not taxable savings/dividend income so should not be included in calculator above.

22225

Thank you!!!! I assume that is the same for ND&I? 

Dazed_and_C0nfused

22225 said:

Sorry to jump on this thread..
 For child benefit purposes, I assume interest on savings is added on to your income when working out your 'adjusted taxable income' but is it the case that savings interest even from ISAs is also added on in terms of calculating your adjusted taxable income?

No, taxable interest forms part of your ANI, even if taxed at 0%.

Tax exempt interest such as that from an ISA isn't part of your ANI.

Dazed_and_C0nfused

22225 said:

Thank you!!!! I assume that is the same for ND&I? 

NS&I??

If so it depends which product.  Some will be taxable some won't.