Basic rate taxpayer with high savings

cheekydollarJ

Hi,
im a (just) a basic rate taxpayer but recently sold a property and now renting. I therefore have a chunk of savings until I buy a new property. 

Not only will the savings now take me over my PSA, but I think this will make me a higher rate taxpayer and so my PSA will reduce to £500 and I will be taxed 40% on my savings! Double hit! 

Does anyone know if there is a calculator to tell me what the best thing to do is and if I should overpay my pension to offset this?

thanks for your help

ColdIron

If you are on the cusp, pension contributions are obvious and make a lot of sense

Swipe

Definitely worth paying into your pension to bring you back below the threshold if you can afford to. You should be able to work out how much you need to finally pay in towards the end of the tax year.

Dazed_and_C0nfused

cheekydollarJ said:

Hi,
im a (just) a basic rate taxpayer but recently sold a property and now renting. I therefore have a chunk of savings until I buy a new property. 

Not only will the savings now take me over my PSA, but I think this will make me a higher rate taxpayer and so my PSA will reduce to £500 and I will be taxed 40% on my savings! Double hit! 

Does anyone know if there is a calculator to tell me what the best thing to do is and if I should overpay my pension to offset this?

thanks for your help

You need to calculate your tax liability ignoring the savings nil rate band (aka PSA) and that determines how much nil rate band you get.

Additional RAS pension contributions will increase your basic rate band as will any Gift Aid payments.

I'm assuming your "just" means you are already close to being a higher rate payer and not just into the basic rate band (with massive interest expected!) as that would mean you could have some savings starter rate band available.

Don't forget you can manipulate things to a certain extent by carefully choosing the term of any account and the making sure the dates interest is paid suit you best.

cheekydollarJ

Thanks for the replies, that’s really helpful. I wi look into overpaying on my pension.