Savings Tax

Roberto21

Hello

Trying to understand how Starter Rate for Savings works, which as I understand along with 1st £1000 interest tax free, you can add a further £5000 tax free.Tried Internet research, nothing gives me an answer. My question is, am on basic rate 20% tax, How does one work out if you are entitled to this. Is there a formula to apply or can you give an example of how it works

Thanks

Alan

Phoenix72

Roberto21 said:

Hello

Trying to understand how Starter Rate for Savings works, which as I understand along with 1st £1000 interest tax free, you can add a further £5000 tax free.Tried Internet research, nothing gives me an answer. My question is, am on basic rate 20% tax, How does one work out if you are entitled to this. Is there a formula to apply or can you give an example of how it works

Thanks

Alan

Tax free is a wrong description, it's a 0% rate. What is the income you are paying 20% tax on and how much before tax is it?

Phoenix72

https://www.gov.uk/apply-tax-free-interest-on-savings

Dazed_and_C0nfused

Roberto21 said:

Hello

Trying to understand how Starter Rate for Savings works, which as I understand along with 1st £1000 interest tax free, you can add a further £5000 tax free.Tried Internet research, nothing gives me an answer. My question is, am on basic rate 20% tax, How does one work out if you are entitled to this. Is there a formula to apply or can you give an example of how it works

Thanks

Alan

ISA's are tax free, non ISA interest is taxable, albeit some may be taxed at 0%.

What you need to do is find out your non savings non dividend income, for example taxable earnings, pension, rental income etc.

If that is say £14,200 and your Personal Allowance is £12,570 then you have used £1,630 of your basic rate band and you would have a savings starter rate band of £3,370 (interest taxed at 0%).

Once that is used you can then use the savings nil rate band of upto £1,000 (also taxed at 0%).

eskbanker

Roberto21 said:

Tried Internet research, nothing gives me an answer.

Where have you been looking?  As well as the gov.uk page linked earlier, the MSE article also seems clear to me:

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

and the low income one at:

https://www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income

However, if you explain your income from each stream then someone on here will clarify how it'll be taxed....