Tax-free savings & the starting savings rate

ColdIron

Silverbullet036 said:

Bigwheels1111 said:

Just remember if you get over 10k a self assessment will need filling.
It’s quite simple online once registered.
I will need to do one next year.
Apart from name address and employment status, it’s only 2 boxes for me, Benefits other and savings.
Takes about 10 minutes.
But 45 minutes on the phone to HMRC to ask which 2 boxes.

I will have to do one for my wife next year for the first time so thanks for the info , sounds very simple after registering

It can be but the key is keeping full and accurate records before you start, then it's a breeze

Bigwheels1111

ColdIron said:

Silverbullet036 said:

Bigwheels1111 said:

Just remember if you get over 10k a self assessment will need filling.
It’s quite simple online once registered.
I will need to do one next year.
Apart from name address and employment status, it’s only 2 boxes for me, Benefits other and savings.
Takes about 10 minutes.
But 45 minutes on the phone to HMRC to ask which 2 boxes.

I will have to do one for my wife next year for the first time so thanks for the info , sounds very simple after registering

It can be but the key is keeping full and accurate records before you start, then it's a breeze

That's right.

I have a couple of spread sheets for all my accounts.

Opening balance and closing balance on the 05/04/2024.

Once every month I add any interest to the total, take 5 minutes.

Silverbullet036

Bigwheels1111 said:

ColdIron said:

Silverbullet036 said:

Bigwheels1111 said:

Just remember if you get over 10k a self assessment will need filling.
It’s quite simple online once registered.
I will need to do one next year.
Apart from name address and employment status, it’s only 2 boxes for me, Benefits other and savings.
Takes about 10 minutes.
But 45 minutes on the phone to HMRC to ask which 2 boxes.

I will have to do one for my wife next year for the first time so thanks for the info , sounds very simple after registering

It can be but the key is keeping full and accurate records before you start, then it's a breeze

That's right.

I have a couple of spread sheets for all my accounts.

Opening balance and closing balance on the 05/04/2024.

Once every month I add any interest to the total, take 5 minutes.

Yes I run a spreadsheet with all her accounts on it. I keep a note every month of the interest earned , whilst making a note of any yearly fixed rates maturing. I guess this is all that hmrc would need and no need for me to wait for the banks to let me know the yearly totals

Malbatross

Dazed_and_C0nfused said:

It's just non savings and non dividend income which can reduce the savings starter rate.

Things like employment, pension, rental income or self employment profits.

Savings interest doesn't reduce it.

So just to clarify, say I receive £14k from a pension plus £10k from dividends and cash ISA savings, I would still qualify for some savings starter rate?
Can you please point me to where this is stated because the Gov.Uk site does not specifically mention dividends or tax free income in it's examples.

Doctor_Who

Malbatross said:

Dazed_and_C0nfused said:

It's just non savings and non dividend income which can reduce the savings starter rate.

Things like employment, pension, rental income or self employment profits.

Savings interest doesn't reduce it.

So just to clarify, say I receive £14k from a pension plus £10k from dividends and cash ISA savings, I would still qualify for some savings starter rate?
Can you please point me to where this is stated because the Gov.Uk site does not specifically mention dividends or tax free income in it's examples.

Taken from here:

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#toc-examples

How does the starting rate for savings work?

The starting rate for savings is a special 0% rate of income tax for savings income that falls within certain limits. The starting rate for savings band is £5,000 for 2023/24. The 0% rate applies to as much of the first £5,000 of taxable income (after deducting the personal allowance and blind person’s allowance, if eligible) that is savings income. Note that dividend income is taxed after savings income. As a result, if you have dividend income it will not affect whether you are eligible for the starting rate for savings on your savings income.

Dazed_and_C0nfused

Malbatross said:

Dazed_and_C0nfused said:

It's just non savings and non dividend income which can reduce the savings starter rate.

Things like employment, pension, rental income or self employment profits.

Savings interest doesn't reduce it.

So just to clarify, say I receive £14k from a pension plus £10k from dividends and cash ISA savings, I would still qualify for some savings starter rate?
Can you please point me to where this is stated because the Gov.Uk site does not specifically mention dividends or tax free income in it's examples.

I don't know why you think gov.uk would or should mention tax free income?  They couldn't possibly cover every scenario.  Premium bond wins, tax credits, Universal credit, lottery wins, interest from ISA's etc etc.

If your only (taxable) non savings non dividend income is £14,000 pension income and you haven't applied for Marriage Allowance then you would have savings starter rate band of £3,570 available.

But that is only of any use of you have (taxable) interest.  Which you don't mention.  
NB.  Interest from ISA's is tax exempt.

The dividends would all be taxed,
£1,000 x 0% (dividend nil rate)
£9,000 x 8.75% (dividend basic/ordinary rate)

Unfortunately gov.uk doesn't make it clear that dividend income doesn't prevent the savings starter rate band from being available.

LITRG is a better source of info.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#:~:text=The starting rate for savings band is £5,000 for,is taxed after savings income.

Dividends of £10,000 or more means a Self Assessment return should be completed.

Albermarle

Malbatross said:

Dazed_and_C0nfused said:

It's just non savings and non dividend income which can reduce the savings starter rate.

Things like employment, pension, rental income or self employment profits.

Savings interest doesn't reduce it.

So just to clarify, say I receive £14k from a pension plus £10k from dividends and cash ISA savings, I would still qualify for some savings starter rate?
Can you please point me to where this is stated because the Gov.Uk site does not specifically mention dividends or tax free income in it's examples.

You ignore any money or interest gained within a cash ISA, when doing these calculations. As far as HMRC are concerned money in an ISA does not exist.

snowstormcat

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

Dazed_and_C0nfused

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

snowstormcat

Dazed_and_C0nfused said:

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

Many thanks for your reply.  Not Scottish residents.  MIL pays £2880 into a SIPP each year but takes it out again with the tax free amount total £3600 - sorry I didn't make this clear, so does this change anything?