What counts as income for savings allowance calculation?

Ainmhidh

Hi all - I searched but couldn't find a clear answer here on the forum (or in one of the articles or on HMRC site).
I'm trying to figure out what counts towards your income in the year in terms of figuring out what the savings interest allowance is.
E.g.
£50,000 PAYE earnings before tax but after pension contributions
£ 2,000 Savings interest in ISAs
£ 800 Savings interest on standard savings accounts and current accounts

1. The ISA interest is tax free, but do they count towards the annual income total?
2. Assuming the ISA interest does not count towards the total, is the income total therefore £50,800, and so is over the higher rate threshold meaning the savings allowance is £500 and some more tax will be due, or is the income below the higher rate threshold and the £1000 allowance apply?

TIA for any help

Ocelot

1. ISA interest is never included in those calculations.
2. Yes, if your non-ISA interest, added to your income, exceeds your personal allowance, you are considered a higher rate tax payer, and your PSA becomes £500.

Yorkie1

As above, so if you can make sufficient extra pension contributions or gift aid, you can increase your basic rate allowance and thus bring yourself back within basic rate tax completely again.

DRS1

Of course if those figures were for the tax year 25/6 it is too late now to make a pension contribution. But a gift aid payment to charity could work.

Ainmhidh

Thanks, it was a more general enquiry as to what currently has to be included in the 'total income' calculation.
Interesting to note that that leads to a potential situation where earning an extra £1 in savings interest (putting you at £1000 savings interest and your total income at £50271) could make you liable for £200 more in tax.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81980460#Comment_81980460

Are you quite confident on your maths?

If total taxable income was £50,270 and that included £1,000 of interest then the interest would all be taxed at 0%.

Add £1 extra interest (and assume no increased basic rate band) then the interest would be taxed like this, £500 x 0% = £0.00 + £500 x 20% = £100.00 + £1 x 40% = £0.40

Total additional tax £100.40