Starter rate for savings - what types of interest qualify?

leosayer

Clearly bank interest qualifies but do the following also qualify as interest for the starter rate for savings?

- Gilt coupons
- Dividends on money market funds / ETFs
- Dividends on gilt funds
- Accumulation distributions on the above

Anything else ?

Dazed_and_C0nfused

leosayer said:

Clearly bank interest qualifies but do the following also qualify as interest for the starter rate for savings?

- Gilt coupons
- Dividends on money market funds / ETFs
- Dividends on gilt funds
- Accumulation distributions on the above

Anything else ?

I think the relevant legislation is referred to here,

https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://assets.publishing.service.gov.uk/media/5a7c7485ed915d6969f44fc7/TIIN_8073_8076_the_starting_rate_of_tax_for_savings.pdf&ved=2ahUKEwj3tJP13qKNAxWcSkEAHW78B7EQFnoECEAQAQ&usg=AOvVaw3dbQGGwaOpD0y8tDZh31GS

leosayer

Thanks, the link focuses more on the tax than the definition of interest which is what I need.

Further googling led me here: https://www.gov.uk/apply-tax-free-interest-on-savings which clarifies the below, so I think I can safely assume that gilt and mm fund dividends are in scope.

Interest covered by your allowance

Your allowance applies to interest from:

• bank and building society accounts
• savings and credit union accounts
• unit trusts, investment trusts and open-ended investment companies
• peer-to-peer lending
• trust funds
• payment protection insurance (PPI)
• government or company bonds
• life annuity payments
• some life insurance contracts

eskbanker

The legislative definition is at:

https://www.legislation.gov.uk/ukpga/2007/3/section/18

which in turn cross-refers to more detailed ones at:

https://www.legislation.gov.uk/ukpga/2005/5/part/4/chapter/2/crossheading/other-income-taxed-as-interest

leosayer

Thanks. I read the legislation and that confirms for me that all 4 items I listed can be counted as interest. 

This page also helped: https://www.litrg.org.uk/savings-property/tax-savings-and-investments

DRS1

If you hold these assets with a platform like Iweb they will send you a summary for each tax year and that should distinguish between dividends and interest - so if you hold unit trusts you should have one entry for dividends from unit trusts and a different one for interest from unit trusts.

masonic

You need to be careful about money market funds. The synthetic ones may give rise to a capital gain rather than income. CSH2 for example has a history of generating very little income, and mostly capital gains (though this may also work for you if below the capital gains allowance).