Tax Free Allowances

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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  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,738
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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.
    The only allowance you have is the Personal Allowance (either £11,310 or £12,570 depending on whether you have applied for Marriage Allowance).

    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).
  • 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! 😊
  • taxigeoff
    taxigeoff Posts: 14
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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.
    The only allowance you have is the Personal Allowance (either £11,310 or £12,570 depending on whether you have applied for Marriage Allowance).

    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).
    Hi, am i right in thinking that you will be taxed on interest over £1000 (after £12570)and will need to claim it back using form R40
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,738
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    taxigeoff 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.
    The only allowance you have is the Personal Allowance (either £11,310 or £12,570 depending on whether you have applied for Marriage Allowance).

    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).
    Hi, am i right in thinking that you will be taxed on interest over £1000 (after £12570)and will need to claim it back using form R40
    Banks and building societies stopped deducting tax at source back in April 2016.

    Do you mean someone else will be deducting tax?

    Is it PPI related interest?

    Most people have no need to complete an R40 anymore.
  • eskbanker
    eskbanker Posts: 29,833
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    taxigeoff 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.
    The only allowance you have is the Personal Allowance (either £11,310 or £12,570 depending on whether you have applied for Marriage Allowance).

    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).
    Hi, am i right in thinking that you will be taxed on interest over £1000 (after £12570)and will need to claim it back using form R40
    No, tax isn't deducted from interest payments at source anymore, so is only paid retrospectively, if necessary at all.  It's plausible that overpayment can happen if the PAYE tax code is based on inaccurate data, but that can be corrected during the tax year in your personal tax account.
  • sham63
    sham63 Posts: 1,063
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    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? 
  • Bigwheels1111
    Bigwheels1111 Posts: 2,247
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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? 
    My code was adjusted this year, I called and they don’t know why.
    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.


  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,738
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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.
  • xylophone
    xylophone Posts: 43,832
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    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


  • taxigeoff
    taxigeoff Posts: 14
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    edited 24 January at 7:21PM
    taxigeoff 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.
    The only allowance you have is the Personal Allowance (either £11,310 or £12,570 depending on whether you have applied for Marriage Allowance).

    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).
    Hi, am i right in thinking that you will be taxed on interest over £1000 (after £12570)and will need to claim it back using form R40
    Banks and building societies stopped deducting tax at source back in April 2016.

    Do you mean someone else will be deducting tax?

    Is it PPI related interest?

    Most people have no need to complete an R40 anymore.
    So if my income is £12000 and i had interest of say £3000 i dont have to do anything and i will not pay any tax?
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