£1000 or £500 tax free interest ?

Dravid1

Hi all, wondered if anyone can help. I pay some tax at 40% on a monthly basis BUT pay in a substantial one off pension contribution so that I get a tax refund and effectively don't pay any tax at 40% over the year as a whole after the tax refund from HMRC.

Does anyone know if that means that I get the full £1,000 tax free savings interest allowance or only the 40% tax payers £500 allowance ?

Dazed_and_C0nfused

Dravid1 said:

Hi all, wondered if anyone can help. I pay some tax at 40% on a monthly basis BUT pay in a substantial one off pension contribution so that I get a tax refund and effectively don't pay any tax at 40% over the year as a whole after the tax refund from HMRC.

Does anyone know if that means that I get the full £1,000 tax free savings interest allowance or only the 40% tax payers £500 allowance ?

ISA's are tax free, there is no other "allowance".

Presumably though you are referring to the savings nil rate band where upto £1,000 interest is taxed at 0%.

To know the answer to that you have to calculate your liability ignoring the 0% band.  If you are a higher rate payer then £500 is taxed at 0%.  If you a just a basic rate payer then £1,000 is taxed at 0%.

Note, you can be deemed a higher rate payer and them not pay any higher rate tax because of the benefit of the 0% tax band.

Also, the 0% band uses up any spare basic rate band as that is the first slice of interest that gets taxed.