Tax on savings

Pingu1

My bank has given me interest on my savings as its the start of a new year, and its gone over the £1000 threshold. I've got two regular savings accounts, so I think the government will turn up to steal some of it (tax). I work full time and am normally taxed the basic rate of 20%. I'm after some clarification. Will I be charged 20% on all the interest earned, or is it just the amount over £1000?

toothdoctor

Amount just over the 1K

where_are_we

Just the amount over £1000 at 20%

Pingu1

Thank you, as I thought. Its the first time its happened so a bit unfortunate. I've got £12000 for a lease extension in one of the accounts, which will be paid next week. I will look to move some of my savings somewhere else.

grumpy_codger

Am I wrong thinking that tax on the full amount of interest that exceeds £1K is due only if the OP's annual income exceeds £17,570?

For a 20% taxpayer this is likely, but not necessarily the case.

>> What is the 'starting rate for savings'?   (See "Chris: Earns £14,500 from work, has £2,500 of savings income")

Albermarle

grumpy_codger said:

Am I wrong thinking that tax on the full amount of interest that exceeds £1K is due only if the OP's annual income exceeds £17,570?

For a 20% taxpayer this is likely, but not necessarily the case.

>> What is the 'starting rate for savings'?   (See "Chris: Earns £14,500 from work, has £2,500 of savings income")

That is correct.

Albermarle

Pingu1 said:

My bank has given me interest on my savings as its the start of a new year, and its gone over the £1000 threshold. I've got two regular savings accounts, so I think the government will turn up to steal some of it (tax). I work full time and am normally taxed the basic rate of 20%. I'm after some clarification. Will I be charged 20% on all the interest earned, or is it just the amount over £10

You might be interested to know that by international standards, the tax regime on savings interest in the UK is relatively generous, especially if you take into account you can save tax free in a cash ISA in addition to the £1000 allowance outside an ISA.
Your average German or Irish person can only look in envy at these tax breaks.

Dazed_and_C0nfused

grumpy_codger said:

Am I wrong thinking that tax on the full amount of interest that exceeds £1K is due only if the OP's annual income exceeds £17,570?

For a 20% taxpayer this is likely, but not necessarily the case.

>> What is the 'starting rate for savings'?   (See "Chris: Earns £14,500 from work, has £2,500 of savings income")

Correct, being a basic rate payer is too simplistic a view to assume only £1,000 is taxed at 0%.

It could be basic rate tax is only due on £1 of non savings non dividend income so then £5,999 would be taxed at 0%.

Pingu1

I've got a tax bill through the post and I don't understand it. They have changed my tax code to 1231X, which gives me a tax free amount of £12319. It says there is untaxed interest at £251. I don't understand where this figure comes from? So now my pay has gone down, and from 1st April it will go down again when they reclaim the £43 I owe. For the year 23/24, I earned £1148 in interest, and for the year 24/25 I earned £1979 in interest. Can anyone help?

Dazed_and_C0nfused

Pingu1 said:

I've got a tax bill through the post and I don't understand it. They have changed my tax code to 1231L, which gives me a tax free amount of £12319. It says there is untaxed interest at £251. I don't understand where this figure comes from? So now my pay has gone down, and from 1st April it will go down again when they reclaim the £43 I owe. For the year 23/24, I earned £1148 in interest, and for the year 24/25 I earned £1979 in interest. Can anyone help?

How much do you think your P60 will show your earnings as for 2024-25?

You can check the figure HMRC have used as their estimate on your Personal Tax Account.  I suspect they have used £12,319.  Which if you are working full time sounds wrong.  Or have you only worked part of the tax year?  Or don't work full time.

Pingu1

I work full time. My tax code was £1257L. Where does the £251 come from? I thought I would get £1000 tax free savings allowance. Is this the same allowance if I was to rent a room out, or do I get a different allowance for that? Really confused.