Tax on interest earned if no other income.

JackRS

We're selling our house and moving into temporary for a bit. 

The balance after paying off mortgage could be invested into savings accounts. 

Am I right in thinking that If these are my wife's accounts and she has no other income, they'll be no tax to pay until the interest earned reaches her personal allowance? 

horsewithnoname

Yes that is correct. She has 12570 personal allowance before it is taxable

Middle_of_the_Road

horsewithnoname said:

Yes that is correct. She has 12570 personal allowance before it is taxable

Your wife could earn up to £18,570 in interest without paying tax.

Tax-free savings: check if you're eligible - Money Saving Expert

• Your personal allowance. This is the amount you can earn without paying any income tax – for most people this allowance is £12,570 (for 2022/23).
• The £5,000 starting savings rate. Here the tax rate is 0%, so again this is the amount you can earn in savings interest before paying any tax on that.
• Your personal savings allowance. This is worth up to £1,000.

JackRS

Middle_of_the_Road said:

horsewithnoname said:

Yes that is correct. She has 12570 personal allowance before it is taxable

Your wife could earn up to £18,570 in interest without paying tax.

Tax-free savings: check if you're eligible - Money Saving Expert

• Your personal allowance. This is the amount you can earn without paying any income tax – for most people this allowance is £12,570 (for 2022/23).
• The £5,000 starting savings rate. Here the tax rate is 0%, so again this is the amount you can earn in savings interest before paying any tax on that.
• Your personal savings allowance. This is worth up to £1,000.

Thanks both for quick reply.  Do you mean i can also earn £5000 in interest before tax even if I have already reach my allowance in income?

Middle_of_the_Road

JackRS said:

Middle_of_the_Road said:

horsewithnoname said:

Yes that is correct. She has 12570 personal allowance before it is taxable

Your wife could earn up to £18,570 in interest without paying tax.

Tax-free savings: check if you're eligible - Money Saving Expert

• Your personal allowance. This is the amount you can earn without paying any income tax – for most people this allowance is £12,570 (for 2022/23).
• The £5,000 starting savings rate. Here the tax rate is 0%, so again this is the amount you can earn in savings interest before paying any tax on that.
• Your personal savings allowance. This is worth up to £1,000.

Thanks both for quick reply.  Do you mean i can also earn £5000 in interest before tax even if I have already reach my allowance in income?

Depending on your earned income, If....

"You earn £17,570 or more. You're taxed as normal on your income and you don't get any of the £5,000 starting savings allowance. But, you do still get the personal savings allowance relevant to your income tax bracket (£1,000 for basic-rate, £500 for higher-rate taxpayers)."

xylophone

Do you mean i can also earn £5000 in interest before tax even if I have already reach my allowance in income?

See

https://www.gov.uk/apply-tax-free-interest-on-savings

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.

If your other income is £17,570 or more

You’re not eligible for the starting rate for savings if your other income is £17,570 or more.

If your other income is less than £17,570

Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Bigwheels1111

If no income is earned, £18,570 of interest can be earned tax free, it’s that simple.
Over 10k interest requires a self assessment form to be filled out.
Hmrc will let you know.

Dazed_and_C0nfused

xylophone said:

Do you mean i can also earn £5000 in interest before tax even if I have already reach my allowance in income?

See

https://www.gov.uk/apply-tax-free-interest-on-savings

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.

If your other income is £17,570 or more

You’re not eligible for the starting rate for savings if your other income is £17,570 or more.

If your other income is less than £17,570

Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Although that isn't quite 100% correct as dividend income can be ignored when it comes to "other income".

Other income is really (taxable) non savings non dividend income.

Dazed_and_C0nfused

horsewithnoname said:

Yes that is correct. She has 12570 personal allowance before it is taxable

Unless she has applied for Marriage Allowance.

horsewithnoname

Dazed_and_C0nfused said:

horsewithnoname said:

Yes that is correct. She has 12570 personal allowance before it is taxable

Unless she has applied for Marriage Allowance.

I expect her husband would know if he had part of her allowance 

JackRS

Thanks everyone for your quick and informative replies confirming my assumptions.  Not been in this position before so never looked into earnings/interest from savings/income tax complexities....