Tax on interest

If I earn £50000 and I have £3500 in interest will that mean I pay 40% on it or just 20%

Comments

  • lee78 said:
    If I earn £50000 and I have £3500 in interest will that mean I pay 40% on it or just 20%
    If that is all of your taxable income then you will pay 0% on the first £500 (which uses up the last little bit of your basic rate band) and 40% on the remaining £3000.

    So total tax due on the interest would be £1,200 
  • lee78
    lee78 Posts: 6
    First Post First Anniversary Combo Breaker
    Forumite
    Oh ok I thought that because I was still in the 20% bracket that I would have the £1000 allowance , so basically they count all interest as part of total income 
    thanks
  • MDMD
    MDMD Posts: 1,414
    First Anniversary First Post Name Dropper
    Forumite
    lee78 said:
    Oh ok I thought that because I was still in the 20% bracket that I would have the £1000 allowance , so basically they count all interest as part of total income 
    thanks
    They could all taxable interest - so would exclude anything in an ISA for example.
  • jimjames
    jimjames Posts: 17,501
    Photogenic Name Dropper First Anniversary First Post
    Forumite
    lee78 said:
    Oh ok I thought that because I was still in the 20% bracket that I would have the £1000 allowance , so basically they count all interest as part of total income 
    thanks
    Yes so if you're doing salary sacrifice for example to get into a lower tax band for the £1000 allowance you also need to take account of other income that will be added to salary to determine the banding.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • eskbanker
    eskbanker Posts: 29,969
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    lee78 said:
    Oh ok I thought that because I was still in the 20% bracket that I would have the £1000 allowance , so basically they count all interest as part of total income 
    thanks
    Yes, the Personal Savings Allowance is a misnomer, as it isn't actually an 'allowance' at all but a nil-rate band, i.e. all (non-ISA) interest is taxable income but the bottom slice is taxed at 0% rather than being 'tax-free' as such, a distinction that may seem arbitrary and pedantic but actually makes a difference for those close to band thresholds....
Meet your Ambassadors

Categories

  • All Categories
  • 341.9K Banking & Borrowing
  • 249.7K Reduce Debt & Boost Income
  • 449.2K Spending & Discounts
  • 234K Work, Benefits & Business
  • 606.2K Mortgages, Homes & Bills
  • 172.5K Life & Family
  • 246.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards