Personal Savings Allowance not deducted from income on self assessment

tigerspill

Is the maximum allowance (2025/2026) for savings interest still up to £5,000 for those with income less that the £12,570?

eskbanker

tigerspill said:

Is the maximum allowance (2025/2026) for savings interest still up to £5,000 for those with income less that the £12,570?

It's still effectively £6K, i.e. up to £5K starting savings rate and another £1K personal savings allowance on top of that.

Dazed_and_C0nfused

DuchessYumington said:

Thank you so much for your responses, I am very grateful for any help to understand the system better.

esk banker - Yes; Pay, pensions, profit etc. Basic rate £13,919.00 x 20% £2,783.80.
But why is this figure slightly less than the Total income on which tax is due at £14,041.00?

And if you have time to respond, I would love some clarification on this statement:
How we have worked out your income tax Your basic rate limit has been increased by £6,625.00 and £330.00 to £44,655.00 for pension payments and Gift Aid payments. This reduces the amount of income charged to higher rates of tax.

Dazed & Confused -
I find the terms / language used are very confusing. I'm a very small scale landlord trying to completing a self assessment accurately, and even with lots of time spent researching, it is not at all straightforward.

Are you sure you were actually eligible to contribute £6,625 into a relief at source pension (where the pension company adds the basic rate tax relief to your net contribution)?

In a previous post you said this,

Details from Tax Calculation:

Pay from all employments £3,657.00 Profit from UK land and property £22,832.00 Interest from UK banks, building societies and securities etc £122.00

DuchessYumington

The basic rate band applies from £12,570 to £50,270, but on the tax return it states that my basic rate limit has been increased by £6,625.00 and £330.00 to £44,655.00, which is still less than the upper limit of the basic rate band. So this calculation is the upper limit minus the personal allowance of £12,570 plus the pension and gift aid contributions? It would really help if they had an information sheet attached to the tax return. This part does make sense if I am assuming correctly.

masonic

DuchessYumington said:

The basic rate band applies from £12,570 to £50,270, but on the tax return it states that my basic rate limit has been increased by £6,625.00 and £330.00 to £44,655.00, which is still less than the upper limit of the basic rate band. So this calculation is the upper limit minus the personal allowance of £12,570 plus the pension and gift aid contributions? It would really help if they had an information sheet attached to the tax return. This part does make sense if I am assuming correctly.

The £44,655 would be referring to the width of your basic rate band, not the amount of income that takes you to the edge of it.

Dazed_and_C0nfused

DuchessYumington said:

The basic rate band applies from £12,570 to £50,270, but on the tax return it states that my basic rate limit has been increased by £6,625.00 and £330.00 to £44,655.00, which is still less than the upper limit of the basic rate band. So this calculation is the upper limit minus the personal allowance of £12,570 plus the pension and gift aid contributions? It would really help if they had an information sheet attached to the tax return. This part does make sense if I am assuming correctly.

The basic rate band is £37,700.

Which has been increased by £6,955 to £44,655 courtesy of the (debatable) relief at source pension contributions and Gift Aid payments.

With your Personal Allowance factored in you would only hit the higher rate tax band if your income was £57,225.

DuchessYumington

So HMRC apply tax relief both by the additional 20% contributions into a pension and then again when income tax is calculated through self assessment?

masonic

DuchessYumington said:

So HMRC apply tax relief both by the additional 20% contributions into a pension and then again when income tax is calculated through self assessment?

The income you pay into your pension can be replaced by income that would otherwise attract higher rate tax. The widening of the basic rate band in addition to basic rate tax relief allows you to avoid paying higher rate tax through making additional pension contributions. You won't gain anything unless you otherwise would have paid higher rate tax.