Understanding savings tax

MeteredOut

S_C said:

MeteredOut said:

S_C said:

Ok just one final scenario..... 

Let's say I have £100k in an ISA.
£10k salary every month. 

0% interest on the current account that the salary comes into. I assume no tax to pay?

Correct. And even if there was interest, there would be no tax as its in an ISA.

But your salary would not go into an ISA automatically - you have to put it there, and you can only put £20K into an ISA each tax year.

Ah right so even if the ISA gave me an extra £20k a year in interest for the £100k I've got it in there, it's only my current account that would dictate if the interest the bank pays is over £18k, when the tax may need to kick in.

Thanks everyone

No, because if you earn £10K/month (assuming £120K/year), you do not get the £5K starter allowance on top of your tax free allowance. You only get this if you earn below £12,570, reducing as you earn towards £17,570

But, you're income tax allowance also reduces when you earn more than £100K/year.

https://www.gov.uk/income-tax-rates/income-over-100000

And your £1000 interest allowance is reduced to £500 since you're a higher rate tax payer. If you were an additional rate tax payer (>£125,140 a year) you get no savings allowance.

Have a read of this: https://www.gov.uk/apply-tax-free-interest-on-savings

slinger2

S_C said:

MeteredOut said:

S_C said:

Ok just one final scenario..... 

Let's say I have £100k in an ISA.
£10k salary every month. 

0% interest on the current account that the salary comes into. I assume no tax to pay?

Correct. And even if there was interest, there would be no tax as its in an ISA.

But your salary would not go into an ISA automatically - you have to put it there, and you can only put £20K into an ISA each tax year.

Ah right so even if the ISA gave me an extra £20k a year in interest for the £100k I've got it in there, it's only my current account that would dictate if the interest the bank pays is over £18k, when the tax may need to kick in.

Thanks everyone

The  last part is completely wrong. Most basic rate taxpayers get £1k allowance before they have to pay tax on their (non-ISA) interest. Someone earning £100k would get less. Of course this applies all your non-ISA savings accounts combined. Not sure why you're going on about your "current account".

jimjames

S_C said:

MeteredOut said:

S_C said:

Ok just one final scenario..... 

Let's say I have £100k in an ISA.
£10k salary every month. 

0% interest on the current account that the salary comes into. I assume no tax to pay?

Correct. And even if there was interest, there would be no tax as its in an ISA.

But your salary would not go into an ISA automatically - you have to put it there, and you can only put £20K into an ISA each tax year.

Ah right so even if the ISA gave me an extra £20k a year in interest for the £100k I've got it in there, i

That would be some ISA account paying 20% interest, which account are you looking at?

You could (and some people do) have over £1 million in ISAs and not pay a single penny in tax on any returns from it whether interest, dividends or capital gains.