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£5000 starting rate for savings

grannysaver
Posts: 2 Newbie

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!
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Comments
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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:3
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It would help if you gave us sime figures? How much is your 'low income-?1
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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!
How much taxable non savings non dividend income do you have (pensions, wages etc)?1 -
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!0
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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!
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-account2 -
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.
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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!
https://www.gov.uk/apply-tax-free-interest-on-savings1 -
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?0 -
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?
"Enter any UK interest that has not been taxedOnly 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.
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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 donations1
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