Starting rate for savings

Mary108

Dazed_and_C0nfused said:

Mary108 said:

Dazed_and_C0nfused said:

Mary108 said:

Dazed_and_C0nfused said:

Mary108 said:

OK so I've just had a possible epiphany!

Is it.....

£13366.29 - earnings minus £12880.00 tax allowance = £486.29

£5000 starting rate for savings minus £486.29 = £4513.71

Savings interest earned 24-25 = £4621.72 minus £4513.71 = £108.01

£108.01 x 20% = £21.60 - this is the amount of savings interest Mum will have to pay for 24 - 25 ?

I don't know where £12,880 has come from but assuming the £13,366 is pension or earnings, and not savings or dividends income, then the liability would be,

£13,366 less Personal Allowance £12,570 = £796 income to be taxed (£159.20 tax due unless she is Scottish resident).

The £4,621 interest will all be taxed,

£4,204 x 0% (savings starter rate)
£417 x 0% (savings nil rate)

If she has State Pension just be careful you have calculated her income correctly.  State Pension is never paid monthly.

She would need to check her Personal Tax Account or tax code notice to understand hey the code was 1288L.  There could be a valid reason.  Or it might be a mistake.

Hi

So.....I understand everything you've said (tax code for Mum for 24-25 was 1288L) apart from £417.00 0% savings nil rate

You seem to be saying that she wont pay any tax at all on her savings for 24-25

Once the savings starter rate is used do we then use the £1000 savings allowance?

No state pension yet

She has a private pension but that is included in the £13366.29 income for 24 - 25

There is no separate "allowance" for savings interest.

Once the Personal Allowance and any available savings starter rate band is used she can then, and only then, use the savings nil rate (0% tax).  This is often called the Personal Savings Allowance but is a 0% tax rate/band, not an allowance in the normal sense.

Depending on why her tax code was 1288L (does she work from home?) there could be more savings starter rate band available.  But that won't alter the tax payable on the interest, that would still be a total of £0.

Her tax code for 24-25 was 1288L as she was working from home for part of the year and HMRC allowed her to keep the 1288L allowance all year

So....on the information I've given you, she wont pay any money to HMRC for tax on savings fior 24-25?

Correct.  It won't be tax free/exempt like an ISA is but from what you've posted it will all be taxed at 0% so nothing to actually pay (on the interest).

Thanks so much for your help. I'd not heard of the £5000.00 savings starting rate before, but heard Martin talking about it the other day and thought it might be relevant for Mum...and it is! Hooray

LL_USS

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Mary108

LL_USS said:

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Thank you and thank you for your comments on the amount of savings not in ISAs. Mum has fulfilled all her ISA allowance and does every year. Do you have any ideas as to what she could do with the money that isnt in an ISA ? She's 63 so she doesnt want to put any more money into her auto enrolment pension or start a SIPP (she doesnt want any more money to be left to the vagaries of the stock market). She has 50K in premium bonds. Is there anything else she could do to save on tax , which she has missed?

Dazed_and_C0nfused

Mary108 said:

LL_USS said:

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Thank you and thank you for your comments on the amount of savings not in ISAs. Mum has fulfilled all her ISA allowance and does every year. Do you have any ideas as to what she could do with the money that isnt in an ISA ? She's 63 so she doesnt want to put any more money into her auto enrolment pension or start a SIPP (she doesnt want any more money to be left to the vagaries of the stock market). She has 50K in premium bonds. Is there anything else she could do to save on tax , which she has missed?

As she isn't paying tax on her savings interest I'm not sure what tax she expects to save 🤔

Or do you have some estimated figures for 2025-26?

Mary108

Dazed_and_C0nfused said:

Mary108 said:

LL_USS said:

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Thank you and thank you for your comments on the amount of savings not in ISAs. Mum has fulfilled all her ISA allowance and does every year. Do you have any ideas as to what she could do with the money that isnt in an ISA ? She's 63 so she doesnt want to put any more money into her auto enrolment pension or start a SIPP (she doesnt want any more money to be left to the vagaries of the stock market). She has 50K in premium bonds. Is there anything else she could do to save on tax , which she has missed?

As she isn't paying tax on her savings interest I'm not sure what tax she expects to save 🤔

Or do you have some estimated figures for 2025-26?

I take your point. She HAS paid tax on her savings in 2023 and 2024. I'm guessing she might pay a little tax next year. But tbh she's quit work/only going to work a few hours from now on.....so it should be a zero/ near to zero tax on savings situation from now on. 

I take the point also that she has a lot of money in  non ISA savings accounts. But there's a limit of £20K a year !!

Dazed_and_C0nfused

Mary108 said:

Dazed_and_C0nfused said:

Mary108 said:

LL_USS said:

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Thank you and thank you for your comments on the amount of savings not in ISAs. Mum has fulfilled all her ISA allowance and does every year. Do you have any ideas as to what she could do with the money that isnt in an ISA ? She's 63 so she doesnt want to put any more money into her auto enrolment pension or start a SIPP (she doesnt want any more money to be left to the vagaries of the stock market). She has 50K in premium bonds. Is there anything else she could do to save on tax , which she has missed?

As she isn't paying tax on her savings interest I'm not sure what tax she expects to save 🤔

Or do you have some estimated figures for 2025-26?

I take your point. She HAS paid tax on her savings in 2023 and 2024. I'm guessing she might pay a little tax next year. But tbh she's quit work/only going to work a few hours from now on.....so it should be a zero/ near to zero tax on savings situation from now on. 

I take the point also that she has a lot of money in  non ISA savings accounts. But there's a limit of £20K a year !!

ISA's aren't always best.

5% from a non ISA account that has 20% tax to pay is better (financially) than 3.75% from a Cash ISA.

DRS1

Mary108 said:

Dazed_and_C0nfused said:

Mary108 said:

LL_USS said:

If you google "what is saving stater rate" then you will see this: In essence, if you earn less than £17,570, you can earn up to £5,000 in savings interest without paying any tax on it, in addition to any tax-free savings interest you may be entitled to through the personal savings allowance.

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

Thank you and thank you for your comments on the amount of savings not in ISAs. Mum has fulfilled all her ISA allowance and does every year. Do you have any ideas as to what she could do with the money that isnt in an ISA ? She's 63 so she doesnt want to put any more money into her auto enrolment pension or start a SIPP (she doesnt want any more money to be left to the vagaries of the stock market). She has 50K in premium bonds. Is there anything else she could do to save on tax , which she has missed?

As she isn't paying tax on her savings interest I'm not sure what tax she expects to save 🤔

Or do you have some estimated figures for 2025-26?

I take your point. She HAS paid tax on her savings in 2023 and 2024. I'm guessing she might pay a little tax next year. But tbh she's quit work/only going to work a few hours from now on.....so it should be a zero/ near to zero tax on savings situation from now on. 

I take the point also that she has a lot of money in  non ISA savings accounts. But there's a limit of £20K a year !!

Well we hope it will stay at £20k pa.

She should keep up with her ISA contributions because at some stage (4 years time?) she will get the state pension and that will change the tax figures again.

Sarahspangles

LL_USS said:

I am wondering, same as @Mark_d, to get almost 5K interest a year, one needs about 100K. It's rare to have 100K saving outside of ISA. If it's in ISA then no tax issue to be considered anyway.

It’s not that rare, example scenarios are inheritance, pension commencement lump sums, downsizing that releases capital and divorce settlements. 

Between the two of us, my OH and I have managed the full set at various times.