Paying Income Tax on Savings Question

fBi24_2024

Due to an anomaly of my finances last tax year is the first (and will be the only) year I have been (just) over the £500 threshold for declaring interest on my savings in order to be taxed so I'm a newbie. I am a higher tax payer in theory as my salary is over the threshold but I don't actually pay anything at the higher rate as my pension contributions are hefty and taken before taxation so I only pay income tax on my salary at the lower rate.

Does this mean I can earn £1000 before declaring in which case I won't need to, or am I classed as a higher rate payer even though I don't pay any at that rate and will therefore have to declare?

eskbanker

What do you mean by 'declaring' - do you already self-assess?

fBi24_2024

No, I don't self assess as I only have a PAYE salary. 
My internet searching seemed unclear on whether it was done automatically or not so apologies if this is a non question and HMRC will just automatically do.

masonic

If you are salary sacrificing into your pension, then it sounds like you will be a basic rate taxpayer. Check your P60. Providing this and other income adds up to below the higher rate threshold, it would render it a non-issue.

fBi24_2024

masonic said:

If you are salary sacrificing into your pension, then it sounds like you will be a basic rate taxpayer. Check your P60. Providing this and other income adds up to below the higher rate threshold, it would render it a non-issue.

Thanks. Yes it's salary sacrifice. Have checked P60 and you're correct.
Thanks for solving my confusion!

Dazed_and_C0nfused

fBi24_2024 said:

masonic said:

If you are salary sacrificing into your pension, then it sounds like you will be a basic rate taxpayer. Check your P60. Providing this and other income adds up to below the higher rate threshold, it would render it a non-issue.

Thanks. Yes it's salary sacrifice. Have checked P60 and you're correct.
Thanks for solving my confusion!

It is taxable income that is crucial.

If your salary is say £75k but you have agreed to give up £30k of that in return for additional employer pension contributions then your taxable earnings from that job would be £45k.

You don't benefit from any pension tax relief with employer contributions, in the example above you would give up £30k salary and end up with £30k in your pension, not £37.5k.  But you have avoided paying both tax and NI on the £30k sacrificed.

Remember you need to include the taxable interest when determining if you are a higher rate payer or not.

fBi24_2024

Thanks D+C, after pension I'm considerably under the threshold so the savings won't take me over.

maman

FYI, the banks involved will inform HMRC of your savings so you wouldn't need to 'declare' in any event as you're on PAYE. 

eskbanker

maman said:

FYI, the banks involved will inform HMRC of your savings so you wouldn't need to 'declare' in any event as you're on PAYE. 

Being on PAYE doesn't grant any immunity from self-assessing, but it's only savings interest over £10K that triggers a requirement to self-assess if not doing so for other reasons....