Tax on interest from savings

CaptainSkeptical

Hi - I've tried to read up on this but can't properly understand it.

My wife, who is retired, will soon receive a pension of approx £4k per annum. This will be her only income. We also anticipate that in the next few months she will have savings that will generate more than £1k interest each year (she wants to kep it in a easy access savings account as opposed to an ISA).  Does this mean she will pay tax on any interest she's made over the £1k ?

Regards

TheSpectator

Is she in receipt of state pension yet?

If her only income is the £4k pension then she still has around £8500 unused personal allowance to set against any taxable interest. Don't really need to take the personal savings rate into account until income is over the standard tax free allowance.

Dazed_and_C0nfused

CaptainSkeptical said:

Hi - I've tried to read up on this but can't properly understand it.

My wife, who is retired, will soon receive a pension of approx £4k per annum. This will be her only income. We also anticipate that in the next few months she will have savings that will generate more than £1k interest each year (she wants to kep it in a easy access savings account as opposed to an ISA).  Does this mean she will pay tax on any interest she's made over the £1k ?

Regards

The £1,000 you are referring to is of absolutely no use to your wife.

She has to use her Personal Allowance before that can be used.

GrumpyDil

And why has she discounted ISAs? I'm getting a higher rate of interest on my flexible cash ISA than most savings accounts are paying and have the same degree of access as I would have on an easy access savings account. 

CaptainSkeptical

She's not got the state pension yet, she doesn't want an ISA for her own reasons, and we did read the HMRC website.

Thanks for the responses - I'm a lot clearer now.
 
Cheers

Albermarle

CaptainSkeptical said:

She's not got the state pension yet, she doesn't want an ISA for her own reasons, and we did read the HMRC website.

Thanks for the responses - I'm a lot clearer now.
 
Cheers

There is also a £5K starter rate for savings, which works as follows.
Personal allowance £12570
Starter savings        £5000
Personal savings allowance £1000
Then from this £18570 , you take away her pension £4K and her state pension ( when she gets it) £11k ( approx) 
So she can earn £3570 in interest tax free.
How the starting rate for savings works - Money Saving Expert

CaptainSkeptical

Albermarle said:

CaptainSkeptical said:

She's not got the state pension yet, she doesn't want an ISA for her own reasons, and we did read the HMRC website.

Thanks for the responses - I'm a lot clearer now.
 
Cheers

There is also a £5K starter rate for savings, which works as follows.
Personal allowance £12570
Starter savings        £5000
Personal savings allowance £1000
Then from this £18570 , you take away her pension £4K and her state pension ( when she gets it) £11k ( approx) 
So she can earn £3570 in interest tax free.
How the starting rate for savings works - Money Saving Expert

Excellent - much appreciated 👍