What counts as income for the purposes of the starting savings rate allowance?

Gerbert

Thanks everyone. It seems we are all agreed then.

I find this surprising because I was assuming that the 5000 GBP starting savings rate allowance is there for the benefit of low-income people, in particular those with a relatively small regular pension income who depend on interest on savings to top that up. If that is the idea behind it then it seems very counterintuitive to give the benefit additionally to those who have substantial (but non-taxable) income. But maybe I am wrong about why it was introduced in the first place (?)

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948027#Comment_81948027

This should enlighten you.

https://www.gov.uk/government/publications/issue-briefing-starting-tax-rate-for-savings-interest/issue-briefing-starting-tax-rate-for-savings-interest?hl=en-GB#:~:text=It%20is%20also%20increasing%20the,to%20reclaim%20it%20from%20HMRC%20.

Gerbert

Thanks, but that just confirms that the intention was indeed to aid people on low incomes, leaving it unexplained why the allowance for savings interest benefit should also benefit those with substantial non-taxable income such as the 25% pension lump sum.

I'm not arguing that it is wrong or even that I disapprove particularly; just that it seems an odd way to do it.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948138#Comment_81948138

It's all relative but the fact is if you didn't have a low level of non savings non dividend income you wouldn't be able to use the savings starter rate band.

You're just choosing to bring things that simply aren't relevant from an income tax perspective into the equation.

You could win £72 million on the Euromillions on Friday and still be able to utilise the savings starter rate band each year if your only income was £3 million in interest each year.

sheramber

https://forums.moneysavingexpert.com/discussion/comment/81948138#Comment_81948138

Then. Hangs it to low taxable income.

HMRC have no knowledge of how much non taxable income you have. They have no interest it.

molerat

https://forums.moneysavingexpert.com/discussion/comment/81948138#Comment_81948138

You will be even more shocked when you find people "earning" in excess of £50K receiving low income benefits because they pay so much into their pension to reduce their net pay to below the benefit threshold. All perfectly above board.