Taxable Interest on Savings

Mollytots

Myself & my OH don't work, he's just taken early retirement at 58, so we don't have any income, (apart from interest on savings) until he's due his private pension at 60.

In the bank today & was told that we can still only earn £1k interest & then any amount over that is taxable. I thought our personal allowance of £12,570 would cover the saving interest earned?

Can anyone advise please

Thank you

eskbanker

If there's no other income, and standard unadjusted personal tax allowance, then up to £18,570 of savings interest can be earned without any tax being due:

https://www.moneysavingexpert.com/savings/tax-free-savings/

jimjames

The bank told you wrong (not really surprising as they're not tax experts). If you have no income then you have your full personal allowance plus additional allowances so it's around £18k you can earn in interest before tax. Hopefully someone will be along with correct numbers.

Sarahspangles

Mollytots said:

Myself & my OH don't work, he's just taken early retirement at 58, so we don't have any income, (apart from interest on savings) until he's due his private pension at 60.

In the bank today & was told that we can still only earn £1k interest & then any amount over that is taxable. I thought our personal allowance of £12,570 would cover the saving interest earned?

Can anyone advise please

Thank you

You have lots of allowance to use but it’s still worth considering getting savings into ISAs ready for when you have pension income to take.

If you earn more than £10k in savings interest you have to complete a Self Assessment return….

Mollytots

Sarahspangles said:

You have lots of allowance to use but it’s still worth considering getting savings into ISAs ready for when you have pension income to take.

If you earn more than £10k in savings interest you have to complete a Self Assessment return….

Thank you, we're both maxed out on ISA's, can't wait for the new financial year 

surreysaver

If he's just taken early retirement, then he will have tax to pay (assuming he's earned more than his allowance) until the new tax year 

Dazed_and_C0nfused

Mollytots said:

Myself & my OH don't work, he's just taken early retirement at 58, so we don't have any income, (apart from interest on savings) until he's due his private pension at 60.

In the bank today & was told that we can still only earn £1k interest & then any amount over that is taxable. I thought our personal allowance of £12,570 would cover the saving interest earned?

Can anyone advise please

Thank you

Someone no doubt commenting on something they know little or nothing about.

The £1,000 is the final slice of the equation.

You need to use your Personal Allowance first.

Then once that has been used any available savings starter rate band.  Which for someone with just taxable interest as income will be £5,000 (all taxed at 0%).

And once that has been used the savings nil rate band (aka Personal Savings Allowance) can be used.  That is the £1,000 (again all taxed at 0%).

scoot65

eskbanker said:

If there's no other income, and standard unadjusted personal tax allowance, then up to £18,570 of savings interest can be earned without any tax being due:

https://www.moneysavingexpert.com/savings/tax-free-savings/

If someone was not working and had a stocks and shares GIA, would dividends come under this £18k figure also? Or is it purely for cash savings interest? 

 

Dazed_and_C0nfused

scoot65 said:

eskbanker said:

If there's no other income, and standard unadjusted personal tax allowance, then up to £18,570 of savings interest can be earned without any tax being due:

https://www.moneysavingexpert.com/savings/tax-free-savings/

If someone was not working and had a stocks and shares GIA, would dividends come under this £18k figure also? Or is it purely for cash savings interest? 

 

Dividends have their own rules and are last in the sequence of income that is taxed.

If you had spare Personal Allowance then dividend income would use those allowances but of not then neither of the savings 0% rates are relevant.

But dividends have their own 0% tax rate, known as the Dividend Allowance.  The first £500 of dividend income not covered by Personal Allowance is taxed at 0%.

Scrounger

Mollytots said:

Myself & my OH don't work, he's just taken early retirement at 58, so we don't have any income, (apart from interest on savings) until he's due his private pension at 60.

He could also open up a SIPP (private pension) and pay in up to 80% of this years earnings for some extra tax free cash.
Next year pay in £2880 for a further £720 free cash.

Don't miss out on this free money!


Scrounger

scoot65

Dazed_and_C0nfused said:

scoot65 said:

eskbanker said:

If there's no other income, and standard unadjusted personal tax allowance, then up to £18,570 of savings interest can be earned without any tax being due:

https://www.moneysavingexpert.com/savings/tax-free-savings/

If someone was not working and had a stocks and shares GIA, would dividends come under this £18k figure also? Or is it purely for cash savings interest? 

 

Dividends have their own rules and are last in the sequence of income that is taxed.

If you had spare Personal Allowance then dividend income would use those allowances but of not then neither of the savings 0% rates are relevant.

But dividends have their own 0% tax rate, known as the Dividend Allowance.  The first £500 of dividend income not covered by Personal Allowance is taxed at 0%.

Many thanks for the reply. Very useful!