Gift aid and Tax on interest

BrainWars

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Dazed_and_C0nfused

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Yes.

And yes within certain limits, i.e. the tax liability on the interest (using your example).

saajan_12

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Re interest - yes, its income but there are savings allowances which may kick in if the other income is below certain thresholds. 

BrainWars

Great! So as long as the tax I pay on the interest is enough to cover the 25% Gift Aid reclaim, I’m all good, correct?Dazed_and_C0nfused said:

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Yes.

And yes within certain limits, i.e. the tax liability on the interest (using your example).

Great! So as long as the tax I pay on the interest is enough to cover the 25% Gift Aid reclaim, I’m all good, correct?

BrainWars

saajan_12 said:

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Re interest - yes, its income but there are savings allowances which may kick in if the other income is below certain thresholds. 

Thanks for the reminder! I’m only asking because the interest I earn significantly exceeds all savings allowances...

Dazed_and_C0nfused

BrainWars said:

saajan_12 said:

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Re interest - yes, its income but there are savings allowances which may kick in if the other income is below certain thresholds. 

Thanks for the reminder! I’m only asking because the interest I earn significantly exceeds all savings allowances...

Of which there are precisely 0 (for taxable interest).

Presumably you mean the 0% tax bands 😉

zagfles

Dazed_and_C0nfused said:

BrainWars said:

saajan_12 said:

BrainWars said:

Hopefully someone can help clarify a question that I've had for a long time!

If a person's earned income falls within their personal allowance and is not subject to income tax, but they receive significant interest from savings and pay tax on that interest, is this still considered income tax?

And in this scenario, is the person eligible for Gift Aid?

Re interest - yes, its income but there are savings allowances which may kick in if the other income is below certain thresholds. 

Thanks for the reminder! I’m only asking because the interest I earn significantly exceeds all savings allowances...

Of which there are precisely 0 (for taxable interest).

Presumably you mean the 0% tax bands 😉

A 0% tax band is pretty much the definition of an allowance 

The PSA (£1000 for basic rate taxpayers) is definitely an allowance. It's even described as an allowance in the legislation. The savings nil rate isn't, but they're both really allowances. 

DianaStBaby

I have a similar question, and can't get a clear answer from HMRC.
My pension income is around £49,100, savings interest £850, dividends £350. Total income £50,300, so greater than £50,270, therefore some tax at 40% and a PSA of £500. However, I have donated Gift Aid of £100, so this increases my 20% band to £37,800, and consequently pushes my 40% band up to start at £50,370. (I'm basing this on last year's self-assessment calculation, provided by HMRC). Does this therefore restore the PSA of £1,000? 
The dividends are under £500, so no tax should be forthcoming on that.
My current thinking is that I need to reduce my total income from the 3 sources to under £50,270 to avoid any tax at 40% and keep the £1,000 PSA.
Any thoughts or anyone with actual experience of this?

zagfles

DianaStBaby said:

I have a similar question, and can't get a clear answer from HMRC.
My pension income is around £49,100, savings interest £850, dividends £350. Total income £50,300, so greater than £50,270, therefore some tax at 40% and a PSA of £500. However, I have donated Gift Aid of £100, so this increases my 20% band to £37,800, and consequently pushes my 40% band up to start at £50,370. (I'm basing this on last year's self-assessment calculation, provided by HMRC). Does this therefore restore the PSA of £1,000? 
The dividends are under £500, so no tax should be forthcoming on that.
My current thinking is that I need to reduce my total income from the 3 sources to under £50,270 to avoid any tax at 40% and keep the £1,000 PSA.
Any thoughts or anyone with actual experience of this?

Yes.       

Dazed_and_C0nfused

DianaStBaby said:

I have a similar question, and can't get a clear answer from HMRC.
My pension income is around £49,100, savings interest £850, dividends £350. Total income £50,300, so greater than £50,270, therefore some tax at 40% and a PSA of £500. However, I have donated Gift Aid of £100, so this increases my 20% band to £37,800, and consequently pushes my 40% band up to start at £50,370. (I'm basing this on last year's self-assessment calculation, provided by HMRC). Does this therefore restore the PSA of £1,000? 
The dividends are under £500, so no tax should be forthcoming on that.
My current thinking is that I need to reduce my total income from the 3 sources to under £50,270 to avoid any tax at 40% and keep the £1,000 PSA.
Any thoughts or anyone with actual experience of this?

You could reduce your total (taxable) income if you wanted but that really isn't necessary.

The Gift Aid of £100 increases your basic rate band by £100 and although this has no impact on your total taxable income it does, on your figures, mean your total taxable income was less than your increased higher rate threshold.

But I'm not sure why you think some 40% tax would be payable on taxable income of £50,300 when the mix of income is the 49100/850/350 split you have given 🤔