Tax on Savings for 24/25

Sobeboy15

I am just completing my tax return and want to know how much tax I might have to pay.

I am retired and have a pension of £1,810 per annum.

In 24/25 I had £26,392 in savings interest and £230 in dividends.

Are my dividends free of tax as they are under £500 (should I declare them on my tax return)?

Will I get the starter rate savings allowance as I earn under £12,750 meaning that £18,750 of my interest is tax free or will that be reduced by pension of £1,810 leaving tax free savings of £16,940?

Any Insight would be greatly appreciated.

Ayr_Rage

If you are filling in a SA form, follow the notes and fill in the amounts in the appropriate boxes, then view your calculation without actually submitting the form until ready to do so.

Dazed_and_C0nfused

Sobeboy15 said:

I am just completing my tax return and want to know how much tax I might have to pay.

I am retired and have a pension of £1,810 per annum.

In 24/25 I had £26,392 in savings interest and £230 in dividends.

Are my dividends free of tax as they are under £500 (should I declare them on my tax return)?

Will I get the starter rate savings allowance as I earn under £12,750 meaning that £18,750 of my interest is tax free or will that be reduced by pension of £1,810 leaving tax free savings of £16,940?

Any Insight would be greatly appreciated.

You need to declare all your taxable income on the return, you don't get to pick and choose what to declare.  Your dividend income will all be taxed, but at a 0% tax rate.

You will be able to use your Personal Allowance (£11,310 or £12,570) against the pension and interest.

Plus the first £6,000 of the interest will all be taxed at 0%.

From what you've posted the liability for 2024/25 payable in January will be £1,926.40.  Plus £963.20 as a first payment on account for 2025/26.

Vitor

1. Personal Allowance (£12,570)

£1,810 of pension uses part of it. That leaves £10,760 of allowance to set against interest. Remaining interest: £26,392 – £10,760 = £15,632

2. Starting Rate for Savings (up to £5,000 at 0%)

Available in full, because non-savings/non-dividend income is only £1,810 (well below £12,570), So £5,000 of interest taxed at 0%. Remaining interest: £15,632 – £5,000 = £10,632

3. Personal Savings Allowance (£1,000 at 0%)

Taxpayer is a basic rate payer so PSA = £1,000. Remaining interest: £10,632 – £1,000 = £9,632 (taxable at 20%)

4. Dividends

£230 is below the £500 dividend allowance, so no tax payable. Should still be declared on a tax return if one is being filed

5. Tax Due
£9,632 × 20% = £1,926.40

SiliconChip

You say you're retired but you haven't said if you are receiving State Pension. The calculations posted assume you are not, but if you are then you're likely to need to pay a lot more tax than shown.

poseidon1

SiliconChip said:

You say you're retired but you haven't said if you are receiving State Pension. The calculations posted assume you are not, but if you are then you're likely to need to pay a lot more tax than shown.

Seems he was 54 in February 2023, so quite a few years befor state pension  kicks in.

However, back in 2022 he did mention owning 2 mortgage free properties. Have to  assume no  rents receivable since not mentioned in this thread..

Dazed_and_C0nfused

poseidon1 said:

SiliconChip said:

You say you're retired but you haven't said if you are receiving State Pension. The calculations posted assume you are not, but if you are then you're likely to need to pay a lot more tax than shown.

Seems he was 54 in February 2023, so quite a few years befor state pension  kicks in.

However, back in 2022 he did mention owning 2 mortgage free properties. Have to  assume no  rents receivable since not mentioned in this thread..

Maybe they were sold and that's what has generated such significant amounts of interest?

Sobeboy15

Sorry Im not of state pension age and as Dazed and Confused has stated  I had properties that have generated this amount of interest.

Thanks all for your contributions. 

Vitor

-  I had properties that have generated this amount of interest. - 

In that case your tax position is completely different as property rental income is not treated the same as interest from savings; it does not qualify for the Starting Rate for Savings or the Personal Savings Allowance.

Using the figures you've given, tax will be £3,126.40. However if  £26,392 is the gross property rental income then you should be able to offset allowances, e.g. repairs and maintenance to reduce the tax bill.

Dazed_and_C0nfused

Vitor said:

-  I had properties that have generated this amount of interest. - 

In that case your tax position is completely different as property rental income is not treated the same as interest from savings; it does not qualify for the Starting Rate for Savings or the Personal Savings Allowance.

Using the figures you've given, tax will be £3,126.40. However if  £26,392 is the gross property rental income then you should be able to offset allowances, e.g. repairs and maintenance to reduce the tax bill.

Pretty sure the op means they had properties.

Which have been sold, I'm guessing in a previous tax year, and the capital from selling them is what is now generating the taxable interest of £26k

SiliconChip

Vitor said:

-  I had properties that have generated this amount of interest. - 

In that case your tax position is completely different as property rental income is not treated the same as interest from savings; it does not qualify for the Starting Rate for Savings or the Personal Savings Allowance.

Using the figures you've given, tax will be £3,126.40. However if  £26,392 is the gross property rental income then you should be able to offset allowances, e.g. repairs and maintenance to reduce the tax bill.

I think the key word is "had", I'd assume (yes, we all know what assume does!) that the OP sold the properties as Dazed_and_C0nfused suggested and has the money in the bank generating interest.