Tax Free Saving Allowance

pumpkinpie01

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

ColdIron

Yes it can, you have a number of 'allowances' available to you, perhaps as much as £16,170 in your case

https://www.moneysavingexpert.com/savings/tax-free-savings

Dazed_and_C0nfused

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

luci

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

DRS1

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

luci

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

Dazed_and_C0nfused

luci said:

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

You are right.  But for each £1 of basic rate band used by earnings, pension, self employment profits etc you lose £1 of the savings starter rate band.

So someone earning say £20k or with pension income of £20k won't have any savings starter rate band to use.

Note dividend income is taxed after non savings and savings income so does not reduce the savings starter rate band available.

luci

Dazed_and_C0nfused said:

luci said:

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

You are right.  But for each £1 of basic rate band used by earnings, pension, self employment profits etc you lose £1 of the savings starter rate band.

So someone earning say £20k or with pension income of £20k won't have any savings starter rate band to use.

Note dividend income is taxed after non savings and savings income so does not reduce the savings starter rate band available.

Thanks, that was helpful.

I'm currently drawing £12570 from a SIPP, so that I don't pay tax. Would I have a Savings Starter Rate on top of that?

Dazed_and_C0nfused

luci said:

Dazed_and_C0nfused said:

luci said:

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

You are right.  But for each £1 of basic rate band used by earnings, pension, self employment profits etc you lose £1 of the savings starter rate band.

So someone earning say £20k or with pension income of £20k won't have any savings starter rate band to use.

Note dividend income is taxed after non savings and savings income so does not reduce the savings starter rate band available.

Thanks, that was helpful.

I'm currently drawing £12570 from a SIPP, so that I don't pay tax. Would I have a Savings Starter Rate on top of that?

If your only non savings non dividend income is £12,570 them yes.

It would be the full £5,000.  If you apply for Marriage Allowance it would be reduced to £3,740.

luci

Dazed_and_C0nfused said:

luci said:

Dazed_and_C0nfused said:

luci said:

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

You are right.  But for each £1 of basic rate band used by earnings, pension, self employment profits etc you lose £1 of the savings starter rate band.

So someone earning say £20k or with pension income of £20k won't have any savings starter rate band to use.

Note dividend income is taxed after non savings and savings income so does not reduce the savings starter rate band available.

Thanks, that was helpful.

I'm currently drawing £12570 from a SIPP, so that I don't pay tax. Would I have a Savings Starter Rate on top of that?

If your only non savings non dividend income is £12,570 them yes.

It would be the full £5,000.  If you apply for Marriage Allowance it would be reduced to £3,740.

Thanks again.

I have a NS&I Guaranteed Income Bond which pays the interest into my current account monthly, rather than compounding it. The interest should be around £630 this year. Does that mean I will have £4370 allowance for other interest? I think I am getting a better understanding, thanks.

Dazed_and_C0nfused

luci said:

Dazed_and_C0nfused said:

luci said:

Dazed_and_C0nfused said:

luci said:

DRS1 said:

luci said:

Dazed_and_C0nfused said:

pumpkinpie01 said:

Hi, recently retired and earning about £200 per month from a small private pension, no state pension for another 10 years.
My question is can my remaining personal tax allowance (1257L) be used against saving interest?
Thanks for reading 😃

Yes, any unused Personal Allowance is used against taxable interest.

Once that is used you have the next £5,000 interest which would be taxed at 0% (savings starter rate band).

And after that another £1,000 is also taxed at 0% (savings nil rate band, aka Personal Savings Allowance).

Those things are applied in that order and assume you don't have enough interest to be a higher rate payer.

I am always confused when only the Personal Savings Allowance is mentioned when a tax free allowance is mentioned. Why is the £5000 Savings Starter Rate not promoted if that comes before the PSA? 

My understanding of the Savings Starter Rate may be way off.

Probably because the starter rate falls away at lower incomes - even a higher rate tax payer gets the PSA (though only £500 worth).

Sorry for being thick. What do you mean by "falls away"?

My (poor) understanding is that the £5000 Savings Starter Rate is in addition to your £12570 tax free allowance, then the PSA is on top of that. Is that correct or am I way off?

You are right.  But for each £1 of basic rate band used by earnings, pension, self employment profits etc you lose £1 of the savings starter rate band.

So someone earning say £20k or with pension income of £20k won't have any savings starter rate band to use.

Note dividend income is taxed after non savings and savings income so does not reduce the savings starter rate band available.

Thanks, that was helpful.

I'm currently drawing £12570 from a SIPP, so that I don't pay tax. Would I have a Savings Starter Rate on top of that?

If your only non savings non dividend income is £12,570 them yes.

It would be the full £5,000.  If you apply for Marriage Allowance it would be reduced to £3,740.

Thanks again.

I have a NS&I Guaranteed Income Bond which pays the interest into my current account monthly, rather than compounding it. The interest should be around £630 this year. Does that mean I will have £4370 allowance for other interest? I think I am getting a better understanding, thanks.

Yes, but it's not an "allowance".

You would have another £4,370 interest that would be taxed at a 0% tax rate.