Tax on interest. Do I get the PSA?

necronom

I've retired and got about £9,000 from work before doing so this tax year.
I'll already get the Personal Allowance of £12,570 tax free earnings, so any interest up to that will be tax free.
Since I earnt below the £12,570 this tax year from non-interest earnings I think I get the additional £5,000 Starting Savings Rate.
Then I'm reading about the Personal Savings Allowance being £1,000 for 20% tax payers.
But, I won't pay tax this tax year, so am I still counted as a 20% tax payer?  I don't know if I get the additional £1,000.  Surely I need to pay tax to be a tax payer.

I'm fairly confident I won't pay tax on the first £17,570 of income from interest, but it may be £18,570.

It's not important at the moment as I don't go over £15k from interest, but I'd like to know in-case it's important in the future.

There are examples on this site, but the one closest to my situation shows the person having to pay £286 in tax and they get the full £18,570 tax free.  Is that only because they actually pay tax at 20% (even if it is only £286).

Kim_13

The PSA is the last allowance to become available, after the Personal Allowance and £5,000 Starter Rate. You are a non-taxpayer unless those are exhausted, after which the £1,000 PSA becomes available and could reduce your tax liability to nil.

As HMRC apply estimates, you may find that your Personal Allowance is lower than expected as they reduce it by the interest earned in the previous tax year. It would be better if the PSA/Starter Rate were applied first, to avoid inaccurate adjustments when the Personal Allowance may be needed for other income in the next tax year.

Albermarle

As soon as you earn more than £12570, you become a taxpayer.
The starter savings rate and the PSA are taxable income, but the tax rate is 0%.

Dazed_and_C0nfused

necronom said:

I've retired and got about £9,000 from work before doing so this tax year.
I'll already get the Personal Allowance of £12,570 tax free earnings, so any interest up to that will be tax free.
Since I earnt below the £12,570 this tax year from non-interest earnings I think I get the additional £5,000 Starting Savings Rate.
Then I'm reading about the Personal Savings Allowance being £1,000 for 20% tax payers.
But, I won't pay tax this tax year, so am I still counted as a 20% tax payer?  I don't know if I get the additional £1,000.  Surely I need to pay tax to be a tax payer.

I'm fairly confident I won't pay tax on the first £17,570 of income from interest, but it may be £18,570.

It's not important at the moment as I don't go over £15k from interest, but I'd like to know in-case it's important in the future.

There are examples on this site, but the one closest to my situation shows the person having to pay £286 in tax and they get the full £18,570 tax free.  Is that only because they actually pay tax at 20% (even if it is only £286).

If your only non savings non dividend income is the earnings of £9,000 (presumably your P45 has the correct actual amount) then you will have three things available when it comes to interest.  Which are used strictly in this order,

Remainder of your Personal Allowance 
Savings starter rate band (up to £5,000 taxed at 0%)
Savings nil rate band (up to £1,000 taxed at 0%)

Your interest is only "tax free" if it's from an ISA, otherwise it's all taxable.  But some may be covered by your Personal Allowance and the 0% tax rates could mean you have no tax to pay on the interest.

If you are even close to £15k in interest you will be paying plenty of tax and should also be completing a tax return once it exceeds £10k.

NB. If you apply for Marriage Allowance your Personal Allowance will drop to £11,310.

necronom

Thanks everyone.
Yes, I did a tax return last year, and I have one to do now.  Since they wouldn't have been able to recover the owed tax from my PAYE I expect a tax bill to pay manually.

Dazed_and_C0nfused

necronom said:

Thanks everyone.
Yes, I did a tax return last year, and I have one to do now.  Since they wouldn't have been able to recover the owed tax from my PAYE I expect a tax bill to pay manually.

Correct, as you no longer seem to have any PAYE income the tax will be payable on 31 January 2026.