Starting Rate for Savings Interest-Tax

philng

My wife has a pension of £9360 and no other earned income in this year BUT she will receive the following interest and dividends from shares (non ISA).

Savings Interest £2500
Dividends £2500

PLUS significant ISA Dividend income which I assume is excluded?

She has passed her married allowance to me for this tax year.

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

eskbanker

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

philng

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

Thank you if that's the case for this tax year only I would be better putting all our saving Interest accounts in her name & then ensuring the interest is credited by the tax year end as she will receive State Pension in the next tax year.

eskbanker

philng said:

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

Thank you if that's the case for this tax year only I would be better putting all our saving Interest accounts in her name & then ensuring the interest is credited by the tax year end as she will receive State Pension in the next tax year.

Bear in mind that we're nearly halfway through the tax year already though, so you'll already have accrued plenty of interest in your name.

philng

eskbanker said:

philng said:

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

Thank you if that's the case for this tax year only I would be better putting all our saving Interest accounts in her name & then ensuring the interest is credited by the tax year end as she will receive State Pension in the next tax year.

Bear in mind that we're nearly halfway through the tax year already though, so you'll already have accrued plenty of interest in your name.

Yeah had considered that so planning on closing one of my accounts now to crystalise the interest in this tax year as I will be a HRT in the next tax year. 

Dazed_and_C0nfused

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

She would, albeit a very small amount.  And I guess it might not be collected!

£9,360 of the reduced Personal Allowance would be used by the pension income.

The remaining £1,950 could be allocated to the dividend income.

Which leaves all of the £2,500 interest and £550 of the dividends to be taxed.

£2,500 x 0% = £0 (savings starter rate)
£500 x 0% = £0 (dividend nil rate)
£50 x 8.75% = £4.37 (dividend basic rate)

Total due £4.37

Agree the savings nil rate band is of no use to her as she has insufficient income to use it.

eskbanker

Oops, yes, you're right, I forgot that the dividend allowance was £500 now, not £1,000!

philng

Dazed_and_C0nfused said:

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

She would, albeit a very small amount.  And I guess it might not be collected!

£9,360 of the reduced Personal Allowance would be used by the pension income.

The remaining £1,950 could be allocated to the dividend income.

Which leaves all of the £2,500 interest and £550 of the dividends to be taxed.

£2,500 x 0% = £0 (savings starter rate)
£500 x 0% = £0 (dividend nil rate)
£50 x 8.75% = £4.37 (dividend basic rate)

Total due £4.37

Agree the savings nil rate band is of no use to her as she has insufficient income to use it.

But if I switch my savings to her it is possible her Savings interest will be more than £2500 and in this tax year her Tax Allowance was reduced by me using part of her allowance as she is a non tax payer

Dazed_and_C0nfused

philng said:

Dazed_and_C0nfused said:

eskbanker said:

philng said:

Is she able to take advantage of the £5000 Starting Rate for Savings tax allowance in addition the £1000 usual allowance?

Strictly speaking, she'd actually use the £5K starting rate instead of the £1K personal savings allowance, but the bottom line is that she wouldn't be liable to pay any income tax overall....

She would, albeit a very small amount.  And I guess it might not be collected!

£9,360 of the reduced Personal Allowance would be used by the pension income.

The remaining £1,950 could be allocated to the dividend income.

Which leaves all of the £2,500 interest and £550 of the dividends to be taxed.

£2,500 x 0% = £0 (savings starter rate)
£500 x 0% = £0 (dividend nil rate)
£50 x 8.75% = £4.37 (dividend basic rate)

Total due £4.37

Agree the savings nil rate band is of no use to her as she has insufficient income to use it.

But if I switch my savings to her it is possible her Savings interest will be more than £2500 and in this tax year her Tax Allowance was reduced by me using part of her allowance as she is a non tax payer

She isn't a non taxpayer though, not that that is relevant for determining eligibility to Marriage Allowance.

She has £2,500 of the savings starter rate band left to use.

And then the £1,000 savings nil rate band.