reducing hours - will starter saving rate come into play

gele

Hi all. I'm looking to reduce my hours at work next year, somewhere around mid tax year. As I'm a fairly low earner, this reduction will mean over the whole year I will be earning less that £18570. The first part of the year I earn more, pay tax and have personal allowance of £1000 but 2nd part will be on the cusp of not paying income tax at all [not sure on number of reduced hours yet or even if it will be granted] Will the starter saving rate come into pIay and will I therefore have additional tax free saving allowance for the whole tax year? I'm trying to get a rough estimate of how much savings interest I'll be allowed.
Thanks in advance

jaypers

Your overall tax calculation is based on your earnings for this whole of the tax year, and while variation can make PAYE sometimes behave oddly in earlier months, tax on savings interest isn’t calculated until after the tax year has ended. This will mean that your PSA won’t be confused and providing that you are within the parameters for the starter savings rate, it will most certainly qualify and you’ll be fine. 

gele

Thank you for your speedy and straightforward response.  That's good to know. 

ColdIron

Terminology matters

Personal Allowance: £12,570 for most/many people

Personal Savings Allowance: £1,000 at basic rate

As a low earner the PSA is available to you regardless so you should focus on the £12,570 and £17,570 figures over 2025/26

gele

 ColdIron said:

Terminology matters

Personal Allowance: £12,570 for most/many people

Personal Savings Allowance: £1,000 at basic rate

As a low earner the PSA is available to you regardless so you should focus on the £12,570 and £17,570 figures over 2025/26

Thanks, At the moment I earn above  £20k gross and have savings interest within that personal allowance of £1000. Once hours are reduced and I am earning less, I will still have savings interest and it will increase over this next year so may need to have access to additional starter saving rate which was the reason for my question. Beyond next year it most likely wont be an issue.

ColdIron

If we do a simple calculation based on £20,000 pa (I earn above  £20k gross) for the first half of the year and £12,570 pa (will be on the cusp of not paying income tax at all) for the remainder that would be £16,285 earned income

£17,570 - £16,285 would leave you with £1,285 of the Starting Rate for Savings available to you in addition to your £1,000 Personal Savings Allowance

The more you earn above above those initial figures would reduce the starting rate, perhaps down to £0. Adjust the calculation with your best guess numbers

gele

Thank you.  That's a really useful example.

Dazed_and_C0nfused

And don't forget it's taxable earnings/pension income which counts.

If you are in a net pay pension scheme at work your taxable pay (P60 pay figure) will be less than your salary, which can be beneficial from a savings starter rate perspective.