Personal Savings Allowance

BankerInTheBlack

Hi Folks, 

I can't get my head around this and wondering if someone can clear it up as I assume it's quite simple. I note the personal savings allowance changes from £1000 to £500 if you are a higher rate tax payer. So if you earn 1p over the tax threshold for intermediate tax payers you lose £500 from your allowance? I'm sure that's not right and assume it's proportioned somehow but can't find any detail. 

Any info appreciated!

eskbanker

AlistairMSEnew said:

Hi Folks, 

I can't get my head around this and wondering if someone can clear it up as I assume it's quite simple. I note the personal savings allowance changes from £1000 to £500 if you are a higher rate tax payer. So if you earn 1p over the tax threshold for intermediate tax payers you lose £500 from your allowance? I'm sure that's not right and assume it's proportioned somehow but can't find any detail. 

Any info appreciated!

It is indeed as simple as that, once your taxable income (including savings interest) takes you into higher rate tax then your PSA does indeed drop straight from £1K to £500.

Dazed_and_C0nfused

AlistairMSEnew said:

Hi Folks, 

I can't get my head around this and wondering if someone can clear it up as I assume it's quite simple. I note the personal savings allowance changes from £1000 to £500 if you are a higher rate tax payer. So if you earn 1p over the tax threshold for intermediate tax payers you lose £500 from your allowance? I'm sure that's not right and assume it's proportioned somehow but can't find any detail. 

Any info appreciated!

There is no "allowance" as such, it's a 0% tax rate (500 or 1000).

Firstly you check your liability without this 0% rate band and if you are a higher rate payer you recalculate your liability with (upto £500 taxed at 0%).

If basic rate it's £1,000 taxed at 0%.

And yes, it is a cliff edge.

BankerInTheBlack

Thanks for the replies folks. I was sure it wouldn't work like that but it now makes sense why I couldnt find any further info! Cheers.