Trying to work out my personal savings allowance for this tax year

disgruntled1234

Good morning all,

I recently retired and so I won't have been paid a full year's salary from 1st April 2025.  I understand that if I only draw £12570 per year, then my personal savings allowance would be £6000.00.

However, because I've only worked 6 months of the current tax year, I'm thinking my personal savings allowance for this year will be between £1000 and £6000.

I'm not really sure which numbers to use to calculate from though and I wondered whether anyone could help.

My figures are as follows;

Gross Salary (Apr - Sep) - £24968.34

Salary Sacrifice - £10445.11

Health Benefits - £107.24

Tax - £1924.00

NI - £718.34

Net Pay - £12625.02

I believe I'll be able to claim some of the tax back from HMRC but I'm wondering whether based on the above figures, if I can earn more than £1000 this tax year without paying any tax on the interest.

Next year will be easier because I'll only be drawing down £1047.50 from my pension which will use up my personal tax allowance, and I believe I will then be able to earn up to £6000 in interest without paying any tax.

Many thanks in advance

Dazed_and_C0nfused

disgruntled1234 said:

Good morning all,

I recently retired and so I won't have been paid a full year's salary from 1st April 2025.  I understand that if I only draw £12570 per year, then my personal savings allowance would be £6000.00.

However, because I've only worked 6 months of the current tax year, I'm thinking my personal savings allowance for this year will be between £1000 and £6000.

I'm not really sure which numbers to use to calculate from though and I wondered whether anyone could help.

My figures are as follows;

Gross Salary (Apr - Sep) - £24968.34

Salary Sacrifice - £10445.11

Health Benefits - £107.24

Tax - £1924.00

NI - £718.34

Net Pay - £12625.02

I believe I'll be able to claim some of the tax back from HMRC but I'm wondering whether based on the above figures, if I can earn more than £1000 this tax year without paying any tax on the interest.

Next year will be easier because I'll only be drawing down £1047.50 from my pension which will use up my personal tax allowance, and I believe I will then be able to earn up to £6000 in interest without paying any tax.

Many thanks in advance

You don't need to overcomplicate things.  What does your P45 show your taxable earnings were from 6 April 2025 to when you retired?

Do you get a P11D for health insurance benefit or is that included in your pay value on the P45?

Ignoring interest (and dividends) do you expect to have any other taxable income in the tax year to 5 April 2026?

Albermarle

Next year will be easier because I'll only be drawing down £1047.50 from my pension which will use up my personal tax allowance, and I believe I will then be able to earn up to £6000 in interest without paying any tax.

Presuming you mean £1047.50 of taxable income per month, and you have no other taxable income at all, then yes you will be able to get £6,000 in interest tax free in that tax year.

Presume you are aware that you can not just take taxable income from a DC pension without taking some tax free cash first/at the same time ?

disgruntled1234

Thank you both for your replies.


I've not had my P45 yet as I'm still employed until the end of September. I just used un-taken annual leave to retire earlier this month.  So September's pay will be a full month and will match last month so I know what it will be.

I won't receive a P11D because my company lumps my health benefits into my gross salary so I pay tax at source (I believe that's how it works).

My taxable income for this tax year, I believe, should be £15,910.80, so that does take into account my salary sacrifice amounts.

My tax code is 1257L so my calculation would be

£15,910.80 - £12,570.00 = £3,340.80 which I'd need to pay tax on
20% of £3,340.80 = £668.16 which is what I should have paid tax on this year.
However, I've paid £1,924.00 in tax because HMRC are expecting me to earn the same amount for the rest of the tax year.

Therefore, I will have overpaid tax by £1,255.84 so would expect a refund on this, when I notify HMRC I'm no longer working.

Based on that, I would assume that I should be able to earn more than £1,000.00 in interest on savings without paying tax, and it's this figure I'm trying to work out so I can maximise my savings income as much as possible until the end of the tax year.

@Albermarle.  Yes, I meant £1,047.50 per month starting from April next year.

Many thanks 

disgruntled1234

@Dazed_and_C0nfused Sorry, I missed your question.  I don't expect to receive any other taxable income for the rest of this tax year.

disgruntled1234

@Albermarle

Presume you are aware that you can not just take taxable income from a DC pension without taking some tax free cash first/at the same time ?

Yes, I've already taken a couple of TFLSs from my SIPP which will give me spending money each month until next April.  I'm doing this in small amounts to leave as much invested in my SIPP and drawdown accounts as possible to continue to grow.  Hargreaves, whilst not the cheapest, do make this whole process of taking my 25% tax free, very easy.

Dazed_and_C0nfused

disgruntled1234 said:

Thank you both for your replies.

I've not had my P45 yet as I'm still employed until the end of September. I just used un-taken annual leave to retire earlier this month.  So September's pay will be a full month and will match last month so I know what it will be.

I won't receive a P11D because my company lumps my health benefits into my gross salary so I pay tax at source (I believe that's how it works).

My taxable income for this tax year, I believe, should be £15,910.80, so that does take into account my salary sacrifice amounts.

My tax code is 1257L so my calculation would be

£15,910.80 - £12,570.00 = £3,340.80 which I'd need to pay tax on
20% of £3,340.80 = £668.16 which is what I should have paid tax on this year.
However, I've paid £1,924.00 in tax because HMRC are expecting me to earn the same amount for the rest of the tax year.

Therefore, I will have overpaid tax by £1,255.84 so would expect a refund on this, when I notify HMRC I'm no longer working.

Based on that, I would assume that I should be able to earn more than £1,000.00 in interest on savings without paying tax, and it's this figure I'm trying to work out so I can maximise my savings income as much as possible until the end of the tax year.

@Albermarle.  Yes, I meant £1,047.50 per month starting from April next year.

Many thanks 

If your only non savings non dividend income is going to be £15,910 (and you don't apply for Marriage Allowance) then you will be able to have £2,660 without paying tax on it.

It isn't "tax free" (you need an ISA for that) but it is taxed at two 0% tax rates.

£1,660 courtesy of the savings starter rate
£1,000 from the savings nil rate (aka Personal Savings Allowance).

HMRC will automatically refund any overpaid tax after April next year (early Summer?) but you can use form P50 to make a provisional claim if you don't expect to work, claim taxable benefits or get a pension before 6 April 2026.

disgruntled1234

Thank you @Dazed_and_C0nfused

No Marriage allowance involved.

So the total interest I can earn on savings for this tax year (outside of an ISA, obviously), without paying tax on it, will be £2,660.00?  If so, I'll start to move some spare cash I have into a higher earning savings account.

Many thanks once again

Dazed_and_C0nfused

disgruntled1234 said:

Thank you @Dazed_and_C0nfused

No Marriage allowance involved.

So the total interest I can earn on savings for this tax year (outside of an ISA, obviously), will be £2,660.00?  If so, I'll start to move some spare cash I have into a higher earning savings account.

Many thanks once again

No, you can earn as much as you like.  But based on the info you've provided only the first £2,660 will not have a tax liability.

The next £31,700 interest would be taxed at 20% but if you received more than £50,270 taxable income in total and hadn't made any relief at source pension contributions or Gift Aid donations then that would alter things slightly.  But that would be a nice problem to have 😉

disgruntled1234

Dazed_and_C0nfused said:

disgruntled1234 said:

Thank you @Dazed_and_C0nfused

No Marriage allowance involved.

So the total interest I can earn on savings for this tax year (outside of an ISA, obviously), will be £2,660.00?  If so, I'll start to move some spare cash I have into a higher earning savings account.

Many thanks once again

No, you can earn as much as you like.  But based on the info you've provided only the first £2,660 will not have a tax liability.

The next £31,700 interest would be taxed at 20% but if you received more than £50,270 taxable income in total and hadn't made any relief at source pension contributions or Gift Aid donations then that would alter things slightly.  But that would be a nice problem to have 😉

Sorry, yes, that's what I meant.  I'm trying to pay no tax on my savings for the rest of the tax year.  I realise I can earn as much as I want in interest, but will pay tax on anything over £2660.

Isthisforreal99

disgruntled1234 said:

Dazed_and_C0nfused said:

disgruntled1234 said:

Thank you @Dazed_and_C0nfused

No Marriage allowance involved.

So the total interest I can earn on savings for this tax year (outside of an ISA, obviously), will be £2,660.00?  If so, I'll start to move some spare cash I have into a higher earning savings account.

Many thanks once again

No, you can earn as much as you like.  But based on the info you've provided only the first £2,660 will not have a tax liability.

The next £31,700 interest would be taxed at 20% but if you received more than £50,270 taxable income in total and hadn't made any relief at source pension contributions or Gift Aid donations then that would alter things slightly.  But that would be a nice problem to have 😉

Sorry, yes, that's what I meant.  I'm trying to pay no tax on my savings for the rest of the tax year.  I realise I can earn as much as I want in interest, but will pay tax on anything over £2660.

So you are prepared to earn no interest on some of your savings rather than get 80% of any interest above the 0% rate?

Unless you are putting the remainder in an ISA then it is bonkers logic but each to their own.