Bank account interest

tribetown

I thought that for a basic rate tax payer £1000 of savings interest is tax free.

I am below the earning threshold for income tax from part time self employment but saw that my £29 earned interest was added to my income. I am still below so won't owe any tax but if the interest had taken me over the personal allowance would I pay 20% tax on it?

Dazed_and_C0nfused

tribetown said:

I thought that for a basic rate tax payer £1000 of savings interest is tax free.

I am below the earning threshold for income tax from part time self employment but saw that my £29 earned interest was added to my income. I am still below so won't owe any tax but if the interest had taken me over the personal allowance would I pay 20% tax on it?

Interest from Cash ISA's is " tax free".

Interest from non ISA accounts is all taxable income and any tax due will depend on your other taxable income (and types of income).

The £1,000 savings nil rate band (aka Personal Savings Allowance) is the very last thing available.  And it's really a 0% tax rate, not an allowance in the normal sense.

You can only make use of that if you have used both your Personal Allowance AND the savings starter rate band (upto £5,000 interest taxed at 0%).

cantbelieveit23

It's a hypothetical question, but from my experience I believe you are correct about the £1000 PSA on interest.  My wife and I (both paying tax on our pension income already) spread our savings equally between us, in order to avoid tax, but got it wrong last year, and she had her tax code decreased by a small amount as a result (i.e. paid tax on the excess over £1000).  We have now put more into ISAs to prevent that happening again.
Dazed_and_C0nfused is obviously more knowledgeable about the detail.  I don't really understand about the savings starter rate, but if you Google it, you can read gov.uk explanation along with MSE's.

tribetown

Dazed_and_C0nfused said:

tribetown said:

I thought that for a basic rate tax payer £1000 of savings interest is tax free.

I am below the earning threshold for income tax from part time self employment but saw that my £29 earned interest was added to my income. I am still below so won't owe any tax but if the interest had taken me over the personal allowance would I pay 20% tax on it?

Interest from Cash ISA's is " tax free".

Interest from non ISA accounts is all taxable income and any tax due will depend on your other taxable income (and types of income).

The £1,000 savings nil rate band (aka Personal Savings Allowance) is the very last thing available.  And it's really a 0% tax rate, not an allowance in the normal sense.

You can only make use of that if you have used both your Personal Allowance AND the savings starter rate band (upto £5,000 interest taxed at 0%).

Yes, I understand that interest from a cash ISA is tax free.

The £26 interest was from 3 non ISA accounts. It did not put me over the £12570 threshold but I was surprised to see it added to my self employed income.
I wont be surprised next year.

Dazed_and_C0nfused

tribetown said:

Dazed_and_C0nfused said:

tribetown said:

I thought that for a basic rate tax payer £1000 of savings interest is tax free.

I am below the earning threshold for income tax from part time self employment but saw that my £29 earned interest was added to my income. I am still below so won't owe any tax but if the interest had taken me over the personal allowance would I pay 20% tax on it?

Interest from Cash ISA's is " tax free".

Interest from non ISA accounts is all taxable income and any tax due will depend on your other taxable income (and types of income).

The £1,000 savings nil rate band (aka Personal Savings Allowance) is the very last thing available.  And it's really a 0% tax rate, not an allowance in the normal sense.

You can only make use of that if you have used both your Personal Allowance AND the savings starter rate band (upto £5,000 interest taxed at 0%).

Yes, I understand that interest from a cash ISA is tax free.

The £26 interest was from 3 non ISA accounts. It did not put me over the £12570 threshold but I was surprised to see it added to my self employed income.
I wont be surprised next year.

Your SA calculation does generally include all the taxable income you have declared on your tax return.