Confused about 'Starting Rate for Savings' and 'Personal Savings Allowance'.

JohnB47

I'm just looking to save the missus some money by moving funds out of a savings account into an ISA.

I've just read the HMRC info about this type of thing. I always thought that you could have up to £1000 of interest from a savings account (not an ISA type) before you pay tax on it. That's the Personal Savings Allowance but then I read that:

"Starting rate for savings. You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings. The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be." It then gives an example of someone earning a wage.

What's that all about? My missus is retired and her income is the full state pension plus £90 per month SIPP drawdown (which uses up all of her personal tax allowance).

Is £1000 interest her maximum or is it higher? Thanks.

Oh and can anyone clarify the exact start and end dates for the financial year that this interest sum is relevant to? Is it 4th April one year to 5th April the next?

ColdIron

JohnB47 said:

What's that all about? My missus is retired and her income is the full state pension plus £90 per month SIPP drawdown (which uses up all of her personal tax allowance).

Is £1000 interest her maximum or is it higher?

It looks like she could get nearly £6,000 (starting rate for savings + personal savings allowance) interest per year without paying tax on it. Her SP and drawdown take her just a little over the personal allowance which will reduce the SRS by a few quid

Read this:

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

Oh and can anyone clarify the exact start and end dates for the financial year that this interest sum is relevant to? Is it 4th April one year to 5th April the next?

6th April to 5th April the next

JohnB47

ColdIron said:

JohnB47 said:

What's that all about? My missus is retired and her income is the full state pension plus £90 per month SIPP drawdown (which uses up all of her personal tax allowance).

Is £1000 interest her maximum or is it higher?

It looks like she could get nearly £6,000 (starting rate for savings + personal savings allowance) interest per year without paying tax on it. Her SP and drawdown take her just a little over the personal allowance which will reduce the SRS by a few quid

Read this:

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

Oh and can anyone clarify the exact start and end dates for the financial year that this interest sum is relevant to? Is it 4th April one year to 5th April the next?

6th April to 5th April the next

Thank you.

Well, I am surprised. I felt sure the reply would be that I was confused and that everyone gets just £1000 interest tax free in any tax year. 

Having read your link, I agree, she doesn't need to worry about paying tax over £1000 interest. So we need not have moved money from her savings account to her ISA. Not to worry, they both pay 4% so not much loss.

BTW, we calculated that her SP plus SIPP drawdown comes to just below her personal allowance, so she pays no tax.

Oh and thanks for those dates.

ColdIron

With so much headroom, depending upon your circumstances, you might look at moving some of your savings into her name. Just a thought

JohnB47

ColdIron said:

With so much headroom, depending upon your circumstances, you might look at moving some of your savings into her name. Just a thought

Yes, that's a thought. I don't need to at the moment - I still have ISA headroom and a small savings account holding but in future that could be an option.

Thanks.

Bigwheels1111

Simlpe breakdown.

£12,570 earnings, pensions or interest is tax free.

£  5,000 Starter savings rate, interest. Tax free.

£  1,000 PSA tax free.

£18,570 Total.

Interest over 10k , will need a self assessment return filed.

Very simple, takes 15 mins max.

Takes longer to register.

ColdIron

Only the personal allowance is tax free. The two other bands are taxable but taxed at 0%

Dazed_and_C0nfused

ColdIron said:

Only the personal allowance is tax free. The two other bands are taxable but taxed at 0%

❤️ this excellent reply 😉

dingling68

Dazed_and_C0nfused said:

ColdIron said:

Only the personal allowance is tax free. The two other bands are taxable but taxed at 0%

❤️ this excellent reply 😉

You have taught us well 

eyeonretirement

If you are allowed £12570 earnings would the 25% tax free lump sum taken along with that count or not count towards earnings when it comes to the starter savings rate of £5000 ? Ie I would like to withdraw £15712.50 (12570 + £3142.50 tfls) and still be able to earn £5000 interest from savings without getting taxed?

eskbanker

eyeonretirement said:

If you are allowed £12570 earnings would the 25% tax free lump sum taken along with that count or not count towards earnings when it comes to the starter savings rate of £5000 ? Ie I would like to withdraw £15712.50 (12570 + £3142.50 tfls) and still be able to earn £5000 interest from savings without getting taxed?

Pension TFLS is ignored when assessing taxable income, which is what these nil-rate bands apply to.