Personal Savings Allowance

Dazed_and_C0nfused

As things stand if shouldn't make any difference overall but you cannot have (Personal) allowances greater than £12,570.

With different income levels it would make a difference and you would get the wrong outcome.

As things stand your wife isn't using her savings nil rate band (aka PSA) as she still has some savings nil rate available to use first.

windward10

eskbanker said:

windward10 said:

[savings all in taxable accounts]

Nett Income	£  13,058.00	£  34,250.00		£  47,308.00
		Savings Interest		£    3,715.00
				£  51,023.00

 

[some savings moved to ISA]

Nett Income	£  12,682.00	£  33,254.00		£  45,936.00
		Savings Interest		£    2,000.00
Interest from Cash ISA	£        710.00	£        723.00		£    1,433.00
				£  49,369.00

Unless I'm misunderstanding your calculation, I think you're double-counting by adding the savings interest back in each of these, as it's already been included in the taxable income that flows down to the previous subtotal, so I think your total net income in the first scenario is £47,308, and in the second it's £45,936 + £1,433 (from non-taxable accounts) = £47,369, i.e. a pretty marginal comparison but slightly favouring the ISA option.

Thanks for all the helpful comments. I think I understand now. I have reworked the figures and think I have got them right now.

If I juggle the savings and put more in my wife's accounts we can use up more of her PSA and reduce my interest to below the £1000 threshold. I then don't see the need for a cash ISA as we are getting a better rate elsewhere.

Any comments or suggestions gratefully received.

eskbanker

I don't follow how the gross savings interest changes from £3,715 in the first example to £3,843 in the second - are you perhaps hitting maximum balance restrictions on one or more accounts?

windward10

eskbanker said:

I don't follow how the gross savings interest changes from £3,715 in the first example to £3,843 in the second - are you perhaps hitting maximum balance restrictions on one or more accounts?

We have savings spread across a number of accounts with various interest rates. So the second illustration has moved my savings from a 3.3% account to my wife's accounts, both at a projected 4% rate.

eskbanker

windward10 said:

eskbanker said:

I don't follow how the gross savings interest changes from £3,715 in the first example to £3,843 in the second - are you perhaps hitting maximum balance restrictions on one or more accounts?

We have savings spread across a number of accounts with various interest rates. So the second illustration has moved my savings from a 3.3% account to my wife's accounts, both at a projected 4% rate.

It obviously makes sense to take advantage of whatever decent rates are available, but it confuses a comparison between two options if they're not really like for like, i.e. it would make more sense (to me anyway) to base the comparison on both of you saving at the same interest rate in both scenarios.

windward10

eskbanker said:

windward10 said:

eskbanker said:

I don't follow how the gross savings interest changes from £3,715 in the first example to £3,843 in the second - are you perhaps hitting maximum balance restrictions on one or more accounts?

We have savings spread across a number of accounts with various interest rates. So the second illustration has moved my savings from a 3.3% account to my wife's accounts, both at a projected 4% rate.

It obviously makes sense to take advantage of whatever decent rates are available, but it confuses a comparison between two options if they're not really like for like, i.e. it would make more sense (to me anyway) to base the comparison on both of you saving at the same interest rate in both scenarios.

Thanks @eskbanker I accept that the comparison between taking out the ISA or not would be better if based on the same rate, but these are our real figures. Unless I am missing the point, with all the interest earned from our various accounts, provided I switch most of the savings into my wif'es accounts, we are both below the threshold to pay tax on the interest. So I don't need a cash ISA.

taity70

Hi, im a new to the forum, so apologies if i have jumped in mid thread.

Could anyone advise me on how the HMRC calculates the £1000 per year PSA  in relation to fixed interest savings over more than one year re invested back into that pot with no access to it.
I am aware that Martin Lewis states that interest earned is only counted once it becomes readily available for me to access.

My scenario.
I have £8000 in a 5 year fixed rate  saver at 2.35% yearly interest (not at maturity) which commenced Sept 2019. . So basically £188 per year re invested back into the pot. Compounded over 5 years is circa £980.
This fixed rate saver is available to me Sept 2024.

Over the past few years HMRC have counted this £188 as part of my yearly intetest even though I cannot access it.

I have just spoken to HMRC and tbh they dont seem to be able to give a straight answer.

If I invest this year lets say £10000 for 1 year at 5% , 
Will they add my £980 plus my £500 for 23/34 tax year.

I hope this makes sense  as to me it would sppear that HMRC are having it both ways.

Any comments would be appreciated  thanks.