Confused over tax free allowances on savings interest

tigerspill

Hi,
I am confused about the tax free allowances on savings interest.

The scenario (for my wife) is that the only income she has is what she chooses to take from her SIPP and interest on savings.  We are trying to ensure no tax is paid in the year.

We have been trying to manage this as follows -
Calculate assumed interest for the year (e.g. £1,500 for this example)
Allowing that £1,000 of the interest is tax free and that the remaining taxable interest is £500.
Assuming the normal income tax free allowance is £12,570 - we subtract the £500 taxable interest from this and withdraw £12,070 from her SIPP.

I am no longer sure this is correct as I am reading about a £5,000 starting amount for savings interest that isn't taxable.  

I am not sure whether (using this example) whether she should be using the £5,000 savings interest allowance, or the £1,000 allowance, or somewhere in between.

Is some more knowledgable help educate me on this? 

Thanks

eskbanker

If she withdraws £12,570 of taxable income from her SIPP then she can also benefit from up to £6K of savings interest without paying tax, assuming no other income:

https://www.moneysavingexpert.com/savings/tax-free-savings/

ColdIron

She has the £12,570 Personal Allowance which will cover pension and savings, then she has the £5,000 Starting Rate for Savings and finally the £1,000 Personal Savings Allowance

So she could take £12,570 from the pension, £1,500 in savings interest and pay no tax with headroom for £4,500 more interest

Read this

https://www.moneysavingexpert.com/savings/tax-free-savings

tigerspill

Thank you both.

Dazed_and_C0nfused

And if she had applied (or applies) for Marriage Allowance then her Personal Allowance will drop to £11,310 but she may still be able to benefit from both the 0% tax bands for interest of her pension income is no more than £11,310.

Bit if her pension was say £12,000 then she will lose £690 of the savings starter rate band.