Saving allowance & tax calculation help

Possiblyretired

Hello, Can some kind person help me understand the difference between the £5000 starting rate allowance & the £1000 personal saving allowance please?

In particular I'm trying to understand the sums in calculating 2024/2025 tax due for a married couple.
John has no income apart from savings interest of £16,000
Jane has rental income of £10,500 plus savings interest of £16,000 

edit - I found various online calculators that give me tax figures but they don't show the explanations and struggling to understand the hmrc explanations.

DRS1

I think they both get the PSA and the full starter rate.
It would be different if Jane had £16000 of rental income and £10500 of savings interest.  Then she would have lost £16000 - £12570 = £3430 of the starter rate allowance

Albermarle

If you have no taxable income, then you have your personal allowance and the starter savings rate and the £1000 PSA = £18,570 of interest you can earn before paying any tax on it.

Any other taxable income will use up the personal allowance first and then the starter savings rate, but you still get the £1000 PSA . For example.

Jane will have £2,070 of personal allowance left ( £12,570 minus £10,500) + £5,000 starter savings rate + £1000 PSA.
So she can earn £8,070 in interest without paying tax. 

If someone earned over £17,570, then they can only get £1000 interest free of tax ( less if they earn a lot more.)

Dazed_and_C0nfused

I think John should consider applying for Marriage Allowance.

Possiblyretired

So is this right?
John is has £16,000 -£18.570 ( £12,570 + £5000 + £1000 = £18,570 ) = no tax due
Jane is £26,500 - £18,570 ( £12,570 + £5000 + £1000 = £18,570 ) = £7930 which is taxable

Edit - just remembered- think there is some kind of Landlord allowance of £1000 so 
Jane is £26,500 - £19,570 ( £12,570 + £5000 + £1000 + £1000= £19,570 ) = £6930 which is taxable

Albermarle

So is this right?
John is has £16,000 -£18.570 ( £12,570 + £5000 + £1000 = £18,570 ) = no tax due
Jane is £26,500 - £18,570 ( £12,570 + £5000 + £1000 = £18,570 ) = £7930 which is taxable

Yes and both John and Jane have to fill in a self assessment return as they have earned more than £10K in interest ( unless they fill one in already of course) 

Possiblyretired

Dazed_and_C0nfused said:

I think John should consider applying for Marriage Allowance.

Hadn't thought of that, thanks, will look into it!

Dazed_and_C0nfused

Possiblyretired said:

Dazed_and_C0nfused said:

I think John should consider applying for Marriage Allowance.

Hadn't thought of that, thanks, will look into it!

John would have a reduced Personal Allowance of £11,310.  So more of his income would end up being taxed.  But still all at 0%.  And even with a reduced Personal Allowance John cannot use the savings nil rate band (aka Personal Savings Allowance) with income of just £16,000.

Receiving Marriage Allowance wouldn't make any difference to how Jane's income is taxed.  But she will get £252 knocked off her liability.

John and Jane may also want to consider a different split of where their cash is deposited.  It seems a waste of John's savings nil rate band when Jane is paying basic rate tax on plenty of her savings.

Obviously that introduces a risk that if John meets a nice Jill then Jane never sees some of her capital again 😉

Beeblebr0x

Couldn't Jane put some of her capital into an ISA where the interest is free of income tax?

Possiblyretired

Beeblebr0x said:

Couldn't Jane put some of her capital into an ISA where the interest is free of income tax?

As various fixed saving accounts mature both Jane & John contribute the maximum to ISA & SIPP. They also add to individual GIA as and when they feel comfortable doing so.

Jane has the maximum premium bonds, John is now considering doing the same.

John will also apply for Marriage Allowance. 

Many thanks to all, the explanations & pointers are much appreciated. 

dingling68

Jane should also perhaps check that the total expenses incurred on the property to receive her rental income are less than the rental allowance of £1,000 otherwise she is missing out on further tax relief