Tax Free Allowances
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italydiva
Posts: 2 Newbie
Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?
Any advice would be much appreciated. Thank you.
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italydiva said:Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?Any advice would be much appreciated. Thank you.
If your only taxable non savings non dividend income is £7k of pension income then you have the remainder of your Personal Allowance available to use against any interest (or dividends).
Once that has been used up the next £5,000 will be taxed at 0% (savings starter rate band).
And only once that has been used can you use the £1,000 savings nil rate band (0% tax rate).2 -
Thank you so much for your feedback and the time taken to explain it so clearly.
Delighted to learn I can use up my remaining personal allowance to off set tax on my savings interest prior to then using my £5k (saving Starter Rate) and then my £1k (0% tax rate).
Every little helps! 😊0 -
Dazed_and_C0nfused said:italydiva said:Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?Any advice would be much appreciated. Thank you.
If your only taxable non savings non dividend income is £7k of pension income then you have the remainder of your Personal Allowance available to use against any interest (or dividends).
Once that has been used up the next £5,000 will be taxed at 0% (savings starter rate band).
And only once that has been used can you use the £1,000 savings nil rate band (0% tax rate).
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taxigeoff said:Dazed_and_C0nfused said:italydiva said:Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?Any advice would be much appreciated. Thank you.
If your only taxable non savings non dividend income is £7k of pension income then you have the remainder of your Personal Allowance available to use against any interest (or dividends).
Once that has been used up the next £5,000 will be taxed at 0% (savings starter rate band).
And only once that has been used can you use the £1,000 savings nil rate band (0% tax rate).
Do you mean someone else will be deducting tax?
Is it PPI related interest?
Most people have no need to complete an R40 anymore.0 -
taxigeoff said:Dazed_and_C0nfused said:italydiva said:Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?Any advice would be much appreciated. Thank you.
If your only taxable non savings non dividend income is £7k of pension income then you have the remainder of your Personal Allowance available to use against any interest (or dividends).
Once that has been used up the next £5,000 will be taxed at 0% (savings starter rate band).
And only once that has been used can you use the £1,000 savings nil rate band (0% tax rate).1 -
I’m in the same situation, but only £4k per year Pension income. I’ve recently received a new tax code notice from HMRC and they deduct £550 from my £12570 personal allowance as “untaxed interest”, leaving me with a “total tax free amount” of £12020.My earned interest this tax year will be approx £2700.Why do they do this given the explanations given above?0
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sham63 said:I’m in the same situation, but only £4k per year Pension income. I’ve recently received a new tax code notice from HMRC and they deduct £550 from my £12570 personal allowance as “untaxed interest”, leaving me with a “total tax free amount” of £12020.My earned interest this tax year will be approx £2700.Why do they do this given the explanations given above?
Around £1500 in interest that was all.
24-25 will be interesting as I’ve earned £4001 carers allowance + over 10k interest.
Will files a self assessment and keep my fingers crossed.
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sham63 said:I’m in the same situation, but only £4k per year Pension income. I’ve recently received a new tax code notice from HMRC and they deduct £550 from my £12570 personal allowance as “untaxed interest”, leaving me with a “total tax free amount” of £12020.My earned interest this tax year will be approx £2700.Why do they do this given the explanations given above?
It's because the interest is using up 550 of your unused Personal Allowance.
If your pension income is £4k and your tax code is 1202L then no tax will be deducted from your pension.
Ultimately the savings starter rate and savings nil rate are of no benefit to you as your income is all covered by your Personal Allowance.2 -
Ultimately the savings starter rate and savings nil rate are of no benefit to you as your income is all covered by your Personal Allowance.
They definitely were of benefit in the case here but it took considerable effort to make HMRC see it.....
https://forums.moneysavingexpert.com/discussion/comment/80510722/#Comment_80510722
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Dazed_and_C0nfused said:taxigeoff said:Dazed_and_C0nfused said:italydiva said:Hello, could someone please advise. If I receive £7k pension as my only income, can my remaining personal allowance be combined with my £6k savings allowance to increase the amount I am able to earn tax free on my savings?Any advice would be much appreciated. Thank you.
If your only taxable non savings non dividend income is £7k of pension income then you have the remainder of your Personal Allowance available to use against any interest (or dividends).
Once that has been used up the next £5,000 will be taxed at 0% (savings starter rate band).
And only once that has been used can you use the £1,000 savings nil rate band (0% tax rate).
Do you mean someone else will be deducting tax?
Is it PPI related interest?
Most people have no need to complete an R40 anymore.0
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