Tax on Savings 2008/9-2009/10

Mikeyorks

bristolleedsfan wrote: »

so once the personal allowance is exceeded can someone give a definitive answer as to whether they would then be entitled to 10% savings tax rate up to the amount allowable for this tax band if they have both a pension and savings income ?

There's been several earlier threads - one of them here :-

http://forums.moneysavingexpert.com/showthread.html?t=595269&highlight=%A317%2C000

Concensus is a bit unclear! But I don't think it will be clear until Rates / Bands are announced in Mar 08.

Geoffo_M

I am in the position where all of my income comes from interest on savings. The total interest (gross) is above my personal allowance and I understood that I had to pay tax on ALL my savings accounts, and then claim a rebate at the end of the tax year. As I read it, I could not pick and choose some accounts to pay gross interest and others to pay net interest to match my personal allowance. Have I been correct in doing this?

jem16

Yes you are. You have to be able to declare you are a non-taxpayer to receive gross interest.

Milarky

Having just re-read, the linked-to thread, I understand where isasmurf and others are coming from re. 'top slicing'. Most workers will already be above the allowance+starting rate band and therefore would have nothing to gain from 10% applying to the starting rate on savings.

Will pensioners, as a group, benefit much more, however, since their basic incomes tend to be less than their personal allowance? For instance someone 65+ has a personal allowance of £7550 this year (rising to £9,030) in 2008/09

It is clear that by raising the threshold by much more than inflation - and approximately by half the width of the starting rate band - that the government wants to leave 'better-off' pensioners (i.e. with state+private pension > £7550 this year) unaffected as regards the amount of tax they will pay.

But does the starting rate of tax (for unearned income) still sit above these allowances as well?

Eg a pensioner with £5500 state pension plus £7500 personal/private pension will be paying tax (@20%) on £2970 = £594

Will a pensioner with £5500 state pension plus £2000 personal pension plus £5500 unearned income gain in comparison and be paying tax of just £2230@10% plus £740@20% = £371?

These people could gain from the increase in their personal allowance to 'compensate' the others as I see it.