Tax free savings and the starting savings rate

oldtrucker

In the article by Helen Saxon updated on the 4th may 2023. 

Extract from article ;- 

To find your combined tax-free allowance, subtract your annual income, excluding anything you earn from savings, from £18,570. This is the amount you can earn tax-free. For example...

If you have non-savings income of £13,570 a year, you can earn a further £5,000 in interest and pay no tax (£4,000 from the starting savings rate and £1,000 from the personal savings allowance).

So my question is;-

Re non savings income (ie pensions)  do you use the before or after tax figure, as this can put me just over or well under dependent if its before or after tax

eskbanker

You'd use the pre-tax figure, as the above calculation has to be based on gross taxable income.  Feel free to share more detail of your figures, and people on here will clarify any tax liability....

Dazed_and_C0nfused

oldtrucker said:

In the article by Helen Saxon updated on the 4th may 2023. 

Extract from article ;- 

To find your combined tax-free allowance, subtract your annual income, excluding anything you earn from savings, from £18,570. This is the amount you can earn tax-free. For example...

If you have non-savings income of £13,570 a year, you can earn a further £5,000 in interest and pay no tax (£4,000 from the starting savings rate and £1,000 from the personal savings allowance).

So my question is;-

Re non savings income (ie pensions)  do you use the before or after tax figure, as this can put me just over or well under dependent if its before or after tax

It's the taxable amount which counts, not the amount after any tax had been deducted.

It doesn't make any difference to most people but in that example the reference to finding the combined "tax free allowance" is wrong.

The interest of £5,000 would all be taxed, just at 0%.

£4,000 under they savings starter rate band
£1,000 under the savings nil rate band (aka Personal Savings Allowance)

WoodyMax

So can I just clarify, the top figure of £18,570 includes the £1000 personal savings allowance?

eskbanker

WoodyMax said:

So can I just clarify, the top figure of £18,570 includes the £1000 personal savings allowance?

Yes.      

Dazed_and_C0nfused

WoodyMax said:

So can I just clarify, the top figure of £18,570 includes the £1000 personal savings allowance?

Yes, it's not really an "allowance" in the normal sense, it's a 0% tax band.

spire1

Hi  I get £6200  yearly from a company pension and £1800 interest yearly from my easy access saving account.This is my only income.Would i have to pay any tax.Thanks for any advice.

Doctor_Who

spire1 said:

Hi  I get £6200  yearly from a company pension and £1800 interest yearly from my easy access saving account.This is my only income.Would i have to pay any tax.Thanks for any advice.

If that is all of your taxable income (ignore ISA interest) it will be covered by your personal tax allowance and therefore no tax will be due.

Dazed_and_C0nfused

spire1 said:

Hi  I get £6200  yearly from a company pension and £1800 interest yearly from my easy access saving account.This is my only income.Would i have to pay any tax.Thanks for any advice.

Nope, you have at least £3,310 spare Personal Allowance to use.

£4,570 spare if you haven't applied for Marriage Allowance.

spire1

Hi thanks for the quick replies.Not very clued up on financial affairs.Was a bit worried i would have to pay a bit of tax over £1000 interest.

Doctor_Who

spire1 said:

Hi thanks for the quick replies.Not very clued up on financial affairs.Was a bit worried i would have to pay a bit of tax over £1000 interest.

You can earn quite a bit more than your current £1800 in interest (£3-4K more as Dazed_and_C0nfused says) before you've even used your personal allowance. After that there's £5000 starter savings rate taxed at 0% and then £1000 PSA also taxed at 0% - so I think you are covered even if interest rates go quite a bit higher!