Hitting the high rate tax bracket + Ripple Energy/Ethex

solidpro

I have to submit a personal tax return and my income is through £12.5k salary and the rest in around £37.5k in dividends from my own Ltd company.

Last FY, I declared, for the first time some savings interest of £685. I was surprised to be hit with a 33.75% tax charge as this had apparently taken my income above the basic rate band.

I had assumed there was a tax-free allowance on cash savings interest (I thought it was £1000 or so), so was annoyed to lose a third of this hard-earned interest. I've actually since got rid of most of that cash savings and dumped it into PB. But do I now have to incorporate any cash interest whatsoever as something that will push me into a high rate tax band?

An additional concern is that my investment in (failed) Ripple energy, which would have just been taken directly off my energy bill is now in the Ethex platform and treated as an 'investment'. I wonder if this will now be classified as taxable income too… For those that don't know, the failure of Ripple who managed the co-op wind farm which was built, did not effect my part-ownership of the wind farm co-op. However AFAIK, the bi-annual pay-outs on energy generation are now simply handed over to the investors as cash rather than paid directly to an energy company as a subsidy to my bills.

eskbanker

The personal savings allowance, as with the dividend one, is implemented as a nil-rate band rather than literally being tax-free in the way that ISAs are, so interest earned outside ISAs is all taxable income, and if that tips you over £50,270 then the savings allowance is only £500 rather than £1000.

solidpro

So once into higher band, if total savings interest was £685, the first £500 should have been tax free, and the 33.75% should only be on the last £185?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82128422#Comment_82128422

Almost, but the fact that you were taxed at 33.75% suggests that it was actually the top slice of dividend income that was taxed, as the excess savings would have been taxed at 40%, so they applied the taxation in the most favourable order for you.

phlebas192

An additional concern is that my investment in (failed) Ripple energy,
which would have just been taken directly off my energy bill is now in
the Ethex platform and treated as an 'investment'. I wonder if this will
now be classified as taxable income too… For those that don't know, the
failure of Ripple who managed the co-op wind farm which was built, did
not effect my part-ownership of the wind farm co-op. However AFAIK, the
bi-annual pay-outs on energy generation are now simply handed over to
the investors as cash rather than paid directly to an energy company as a
subsidy to my bills.

IIRC the payments are a mixture of income and repayment of capital. The former element is taxed as income whether it was a deduction from your energy bill or paid directly. Ripple did try to get HMRC to agree that it wasn't income (based on it being a deduction rather than a direct payment) but HMRC said no, hence it being taxable. The repayment of capital is not taxable income.

EthicsGradient

Also, since your salary is only £12.5k, you should benefit from the maximum £5k for your savings interest at the starting savings rate of 0%. So, unless your total savings interest were to exceed £5.5k, the only higher rate tax you will pay is the dividend rate on the amount your total income (salary+interest+dividends) exceeds the £12,570 personal allowance plus the £37,700 basic rate band (assuming you're making no pension contributions or Gift Aid donations).

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82128422#Comment_82128422

How much was actually taxed at 33.75%?

I may be missing something but if you have taxable income totalling £50685 then isn't £415 of that over the £50270 line? And taxable at higher rate?

Just so you know there is an order they use for taxing income which with your income is salary first then savings interest then dividends.

QrizB

IIRC the payments are a mixture of income and repayment of capital.

Th Kirk Hill Coop's own position is that "all income to date is to be treated as 'interest' for tax purposes".

This was spelled out in their members email on 16th November 2025.

(If the OP is a member of one of the other ex-Ripple co-ops, the situation may be different.)

solidpro

https://forums.moneysavingexpert.com/discussion/comment/82128464#Comment_82128464

That seems to be exactly what has happened…as in the £12.5+£685+£37,000 pushed me into the higher band and so that small amount of dividends income got hit with 33%? Or am I missing something?

solidpro

Here's the actual computation:

Tax Borne

Employment 12,570
Savings income - Starting rate 690 @ 0 % NIL
Dividends income 36,510 - Dividend allowance (Basic 500 @ 0 % NIL rate)

Basic rate 36,510 @ 8 .75% 3,194.62 (dividends tax)
Higher rate 690 @ 33 .75% 232.87

So in summary, whilst £500 of the savings income is rated at nil it all pushed the dividends income past the basic band and into the higher, because it's ordered after salary, before dividends?

So in conclusion, I have to be careful that interest, whether from cash savings or from the Kirk Hill windfarm 'investment' should really be calculated just before the end of the FY and deducted from the amount of dividends I take, if I want to avoid losing a third of that interest in tax?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82129393#Comment_82129393

It may just be the way you've presented those figures, but the impression is that total taxable income is either £49,770 or exactly £50,270, neither of which would result in any higher rate tax being payable, unless there are other undisclosed adjustments?