Tax on savings interest for PhD student

mjc48

Hi - I’ve just started a full-time PhD and hence my income is in the form of a stipend, which is not subject to income tax. Since I’m not using up any of my personal tax allowance, do I qualify for the “Starting rate for savings” and can I therefore earn up to £5,000 in savings interest before paying tax? Or would my stipend (£17,688 a year), although not subject to income tax, still be classed as income and therefore result in me not being eligible for the £5,000 starting rate for savings? 

I can’t find any information about this particular scenario online so any help would be appreciated. 

Thanks! 

Dazed_and_C0nfused

If the stipend isn't taxable what income is using your Personal Allowance?

That must be used before the savings starter rate can be be used.

And the savings starter rate band (when available) must be used before the savings nil rate band (aka Personal Savings Allowance) can be used.

mjc48

Hey - there is no income using my personal tax allowance. So are you saying that if your taxable income is zero, then your personal tax allowance (I.e. £12,570 for this tax year) can be used as a tax-free allowance for interest from savings? 

Dazed_and_C0nfused

mjc48 said:

Hey - there is no income using my personal tax allowance. So are you saying that if your taxable income is zero, then your personal tax allowance (I.e. £12,570 for this tax year) can be used as a tax-free allowance for interest from savings? 

Yes.

It's explained on gov.uk.
https://www.gov.uk/apply-tax-free-interest-on-savings

Do you expect to have interest in excess of £18,570?

mjc48

Yes, I had read that page but wasn’t sure whether the stipend would be counted as “other income” in the section that says “if your other income is £17,570 or more”. Based on what you’re saying, it sounds as though it isn’t classed as “other income” here since it is non-taxable itself? 

No, unfortunately my interest will not be in excess of £18,570, haha. 

Dazed_and_C0nfused

mjc48 said:

Yes, I had read that page but wasn’t sure whether the stipend would be counted as “other income” in the section that says “if your other income is £17,570 or more”. Based on what you’re saying, it sounds as though it isn’t classed as “other income” here since it is non-taxable itself? 

No, unfortunately my interest will not be in excess of £18,570, haha. 

HMRC are interested in taxable income so if it's not taxable it's not relevant.

mjc48

OK, that makes sense. Thanks for your help!