Tax Rate - Savings Query

Lozzauk26

Good afternoon

I have a question really in relation to savings, which I’m a little bit confused about.

with my income without taking into consideration any savings income I am below the 50K threshold so obviously 20% tax rate.  a couple of years ago I gain some money ( death in service ) and decided just to put that in a savings account just so down the line we have opportunity to potentially put towards our first house. This money has meant With the savings rates, I have crept over the  50k threshold.

I was looking at the information on the MSE page and it says i’m able to have the personal allowance of £1000 based on 20% taxpayer, before paying interest obviously people on 50K (40% tax payer) only get £500 personal allowance bureau.

How does it work for me? Because obviously I’m only now over the threshold because of interest from savings. would I still qualify for the 1000? or would I be moved into the 500 bracket? 

I was just thinking that if I’m only £100 Over the threshold, I then lose £500 off the allowance Which that means I lose out more for the sake of £100.

Sorry, hopefully this makes sense. as the new financial year comes in I’m obviously going to put some more money into the ISA which hopefully means then it brings me back under the 50k, but I thought I would just message her just to see what people say because you guys are actually better at this kind of thing than me. I’m not great with money

thanks

ColdIron

Lozzauk26 said:

How does it work for me? Because obviously I’m only now over the threshold because of interest from savings. would I still qualify for the 1000? or would I be moved into the 500 bracket? 

I was just thinking that if I’m only £100 Over the threshold, I then lose £500 off the allowance Which that means I lose out more for the sake of £100.

The higher rate threshold for most people is £50,270. If your earnings and interest are £50,370 your £1,000 Personal Savings Allowance will reduce to £500 and a little of your income will be taxed at 40%

You could make a modest extra payment to a pension, this increases the £50,270 threshold by the gross pension contribution (what you put in plus 25% tax relief) which would make you a basic rate taxpayer again and restore your £1,000 allowance

Isthisforreal99

Yes , the interest is taxable income for the purposes of establishing if you are higher rate for PSA. Ifvthe interest takes you over £50,270 income then your PSA is £500.

maman

You say you've put the money in a savings account. Have you and your wife used your ISA allowances? 🤔