Interest on Savings for non Tax payer?

Robwales

Hi, can someone confirm this for me?

My 49 yr old wife is a non tax payer (zero earnings).

However, she has been fortunate to been given a lump sum recently that she is spreading over several Saving accounts (< 85k safety net).

As a non income tax paying person (she earns no money via a job, has no pension earning etc), what is the maximum earnings she can have from these savings before tax kicks in?

I assumed it was £12,570, but someone told me thats for income (from a job?) and that for savings interest (non income?) that the max is £5k?  

But then i also read online its actually £18,750, based on the total of:
£12750 personal allowance
+ 5000 starting savings allowance

+ 1000 personal savings allowance

Can anyone confirm?

Appreciate the advice,
Rob

refluxer

With no other income (eg. a salary or pension), she can potentially earn up to £18,570 in savings interest before paying tax on it.

Have a read through MSE's guide to the starter rate for savings...

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

"You earn less than £12,570. Here it's fairly simple. You benefit from both the £5,000 starting savings allowance – where you pay 0% tax, plus the personal savings allowance of £1,000. So, you can earn a total of £18,570 from income and savings interest without paying any tax."

Notepad_Phil

Robwales said:

...
But then i also read online its actually £18,750, based on the total of:
£12750 personal allowance
+ 5000 starting savings allowance

+ 1000 personal savings allowance
...

This is the correct situation for someone with no other income and who is not using marriage allowance to give up some of their allowance.

ColdIron

A non earner has three separate 'allowances' available to them

1. The Personal Allowance - £12,570 (tax free)
2. The Starting Rate for Savings - £5,000 (taxed at 0%)
3. The Personal Savings Allowance - £1,000 (taxed at 0%)

Total £18,570 taxed at £0

The MSE link above explains it

But on £85,000 all her interest will be covered by the PA alone

eskbanker

ColdIron said:

But on £85,000 all her interest will be covered by the PA alone

OP implies (to me) multiples of £85K being spread in order to keep within the FSCS limit:

Robwales said:

However, she has been fortunate to been given a lump sum recently that she is spreading over several Saving accounts (< 85k safety net).

maman

I read it as a total sum of over 85K so the need to spread it over more than one account.

Whichever the situation, then the interest will be aggregated for tax purposes. She could consider putting some in a tax free ISA, although it would have to be a massive amount of money saved for the income from nterest to go over £18 750.

Robwales

Thanks all the valuable feedback and confirmation - a really brilliant source of information this place - fantastic!

Reed_Richards

If you put £20k in a cash ISA now and another £20k on 6th April that would be £40k completely sheltered from tax.  That may or may not be beneficial, depending on how much money is involved.  At some point your wife will qualify for a pension, which will boost her income.  But maybe you will have found a use for that money by then.

Bigwheels1111

With your wife not having TAX to pay on up to £18,570 an isa is not the best plan.

ISA , rates are lower than fixed rate savings.

Im in the same sort of position, I have fixed rate bonds for max interest.

I have an isa or two, for emergency fund with low access charges, 60, 120 days loss of interest.

My 4k earning leaves £14,570 for interest before tax.

LHW99

Bigwheels1111 said:

With your wife not having TAX to pay on up to £18,570 an isa is not the best plan.

ISA , rates are lower than fixed rate savings.

Im in the same sort of position, I have fixed rate bonds for max interest.

I have an isa or two, for emergency fund with low access charges, 60, 120 days loss of interest.

My 4k earning leaves £14,570 for interest before tax.

Immediately, this will be true, however as Reed_Richards points out, hopefully the OP's wife will have a pension in due course. SP is set to get very close to the PA soon, and base rate seems unlikely to get below 2% any time soon.

ISA allowances are use it or lose it - and there is no guarantee the £20k limit will be increased soon, or even that ISA's won't be abolished.

Putting at least a proportion of the money into ISA's would be something to consider IMO, as would, perhaps opening a SIPP in her name and adding £2880 pa for the HMRC tax relief.

MACKEM99

ColdIron said:

A non earner has three separate 'allowances' available to them

1. The Personal Allowance - £12,570 (tax free)
2. The Starting Rate for Savings - £5,000 (taxed at 0%)
3. The Personal Savings Allowance - £1,000 (taxed at 0%)

Total £18,570 taxed at £0

The MSE link above explains it

But on £85,000 all her interest will be covered by the PA alone

When you say non earner does this apply to someone on state pension and small other pension i.e. Other half has a small pension around 6k and will be getting her full state pension later this year?

Thanks.

M99