£5000 starting rate for savings

grannysaver

HMRC have told me that this £5000 allowance does not apply to interest on savings accounts, just on capital gains etc. is this correct? My understanding was that, being on a low income I can earn £5000 interest on my bank/building society savings before I pay tax. Please help!

ColdIron

Somebody has their wires crossed. The Starting Rate for Savings is exclusively for savings interest, the clue's in the name. CGT has its own separate 'allowance'

Read this:

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

TheSpectator

It would help if you gave us sime figures? How much is your 'low income-?

Dazed_and_C0nfused

grannysaver said:

HMRC have told me that this £5000 allowance does not apply to interest on savings accounts, just on capital gains etc. is this correct? My understanding was that, being on a low income I can earn £5000 interest on my bank/building society savings before I pay tax. Please help!

Absolute nonsense!

How much taxable non savings non dividend income do you have (pensions, wages etc)?

grannysaver

Thanks to all who have replied - my annual income is just above £13000, and last year I earned £1400 interest on my savings. I going to get back to HMRC and try again!

refluxer

grannysaver said:

Thanks to all who have replied - my annual income is just above £13000, and last year I earned £1400 interest on my savings. I going to get back to HMRC and try again!

Provided you have no other income you haven't mentioned then, based on those figures, you won't need to pay tax on your savings. Have HMRC contacted you at all ? If not, there should be no need to contact them about this because they should know what you're earning and also how much interest you're receiving, as the banks and building societies will do this for you.

If you don't already have one, it would be a good idea to set up a personal tax account and that way you can see how things are looking, tax-wise : https://www.gov.uk/personal-tax-account

xylophone

HMRC have told me that this £5000 allowance does not apply to interest on savings accounts, just on capital gains etc. is this correct? My understanding was that, being on a low income I can earn £5000 interest on my bank/building society savings before I pay tax. Please help!

Iff this is really the case, (see https://www.gov.uk/apply-tax-free-interest-on-savings), I suggest that you make a formal complaint to HMRC.

https://www.gov.uk/complain-about-hmrc

It is utterly shocking that the standard of training has fallen so low.

 You might consider sending a copy of your letter  to your MP.

Beddie

grannysaver said:

Thanks to all who have replied - my annual income is just above £13000, and last year I earned £1400 interest on my savings. I going to get back to HMRC and try again!

There's no need to contact HMRC at all. It will be worked out for you and if you have to pay any tax you will be notified, and have a tax code change. But as you won't owe any tax, based on the information given, you don't need to do anything.

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

happybagger

I've been putting some basic 'dummy' figures in to the HMRC tax calculator and I must be misunderstanding the PSA and Savings nil-rate band of £5k.

If we have someone with income of £18k made up of savings interest of £14k and self-employed income of £4k, it was my understanding this would be covered by:

£1,000 PSA
£12,570 Personal tax allowance
£4,430 of the £5k nil-rate band on savings

ie no tax liability.

However the HMRC calculator says £86 tax is due, taxable on £4k, it seems to have ignored the existence of the £1k PSA. Is HMRC calculator incorrect?

https://www.tax.service.gov.uk/guidance/previous-year-tax-checker/question/tax-year

I used 2023/2024 tax year


Even just putting in as £18570 income from interest and no other income comes out at £200 tax due. This must be incorrect surely?

EthicsGradient

happybagger said:

I've been putting some basic 'dummy' figures in to the HMRC tax calculator and I must be misunderstanding the PSA and Savings nil-rate band of £5k.

If we have someone with income of £18k made up of savings interest of £14k and self-employed income of £4k, it was my understanding this would be covered by:

£1,000 PSA
£12,570 Personal tax allowance
£4,430 of the £5k nil-rate band on savings

ie no tax liability.

However the HMRC calculator says £86 tax is due, taxable on £4k, it seems to have ignored the existence of the £1k PSA. Is HMRC calculator incorrect?

https://www.tax.service.gov.uk/guidance/previous-year-tax-checker/question/tax-year

I used 2023/2024 tax year


Even just putting in as £18570 income from interest and no other income comes out at £200 tax due. This must be incorrect surely?

It's an odd calculator, prone to people entering the wrong figure. When it asks for savings interest, it says:
"Enter any UK interest that has not been taxed

Only include the amount of untaxed interest that is above your Personal Savings Allowance, for example if you are a basic rate taxpayer and the untaxed interest received was £1,200, enter £200."

I think you put in £14,000 at that stage, quite understandably unless you read that weird note.

Dazed_and_C0nfused

It is a truly appalling calculator.

The only times you would have tax to pay using your taxable income figures (£4k s/e profits + £14k interest) are if,

1.  You had applied for Marriage Allowance or
2.  Had made some Gift Aid donations