Personal allowance, starting rate for savings, personal saving allowance

e501

Hi

My only income is a state pension and a work pension, giving me a total of £8107 a year.

I am going to invest some money in a 1 year saving bonds.
Because my income is £8107 a year which is under the £12570 (personal allowance), can I make up the difference with my interest from savings?
Am I still then entitle to the starting rate for savings band of £5000 and also personal saving allowance of £1000.

So my entitlement is £12570 + £5000 + £1000 giving me a total of £18570 which is tax free.

Please help as I have different answers from help organisations and 2 versions from the Tax office.

Thank you for your help.

Doctor_Who

Very similar question a couple of posts down with good answers, see here:

https://forums.moneysavingexpert.com/discussion/6454731/how-much-interest-can-a-pensioner-get-tax-free

Dazed_and_C0nfused

e501 said:

Hi

My only income is a state pension and a work pension, giving me a total of £8107 a year.

I am going to invest some money in a 1 year saving bonds.
Because my income is £8107 a year which is under the £12570 (personal allowance), can I make up the difference with my interest from savings?
Am I still then entitle to the starting rate for savings band of £5000 and also personal saving allowance of £1000.

So my entitlement is £12570 + £5000 + £1000 giving me a total of £18570 which is tax free.

Please help as I have different answers from help organisations and 2 versions from the Tax office.

Thank you for your help.

Sad state of affairs 🤨.

Assuming your Personal Allowance is actually £12,570 i.e. you haven't applied for Marriage Allowance then yes you can use any remaining Personal Allowance.  If you have applied for Marriage Allowance then your Personal Allowance would be £11,310 rather than £12,570.

Once that is used you can use the savings starter rate band (£5,000 taxed at 0%).

And only once that has been used can you then use the savings nil rate band (aka Personal Savings Allowance) where up to £1,000 of interest is also taxed at 0%.

Personally I wouldn't say it's "tax free" but you won't pay any tax on the interest until you have exhausted those three elements.