Working out Personal Allowance?

Noneforit999

Hi

My wife earns £16800pa as she is part time.

Can someone check I have worked this out right as it will dictate whether we need an ISA or can get away with a normal savings account.

£16800 minus £5000 starting rate is £4050 leaving £950.

£1000 personal allowance plus the £950 means she can earn £1950 in interest before paying tax?

She has about £45k in savings, half of which is locked into the remainder of a 1 year deal at 4% and the rest is in an easy access at 3.8% so trying to work out what to do with £20k. 

Bigwheels1111

£ 1,770.00 interest tax free.

£18570 Total of earnings, starter tax rate and PSA.

£12,570 Earnings or interest

£ 5,000 Starter savings

£ 1,000 Personal savings Allowance.

Easy access. Best rate today.

https://moneyfactscompare.co.uk/savings-accounts/easy-access-savings-accounts/?quick-links-first=false

https://www.familybuildingsociety.co.uk/savings/easy-access-savings/product-detail/online-saver-(5)?utm_source=moneyfacts&utm_medium=cpc&utm_campaign=online_saver5

ColdIron

Your workings are wrong

£16,800 - £12,570 Personal Allowance = £4,230

That £4,230 is covered by the Starting Rate for Savings leaving £770

That £770 plus the £1,000 Personal Saving allowance gives her £1,770

Noneforit999

Thanks all. Glad I posted then. I even read the example on the Gov website and still misunderstood!

Looks like a cash ISA for £20k is the way to go then considering Coventry BS are doing 5.4% at the moment. 

nic_c

its explained here https://www.moneysavingexpert.com/savings/tax-free-savings/

Dazed_and_C0nfused

Noneforit999 said:

Thanks all. Glad I posted then. I even read the example on the Gov website and still misunderstood!

Looks like a cash ISA for £20k is the way to go then considering Coventry BS are doing 5.4% at the moment. 

Is your £16,800 her salary, usually irrelevant for tax purposes, or her taxable pay (expected P60 pay value)?

If she is is contributing to a pension using the net pay method (common with DB schemes less so DC) then her taxable pay may well be noticeably lower than her salary meaning she has more savings starter rate band available.

Both the savings starter rate band and savings nil rate band mean income is taxed, just at a 0% rate.