When does a non tax payer become a tax payer?

pfpf

hello.

If someone is a non tax payer and they are unlikely to ever become a tax payer, the general concensus is to put your money in to the highest interest savings account rather than an ISA, (not taking RS into account) and then R85 that account, correct?

but at what point would that person become a tax payer purely by interest earned on said savings?

is it simply once savings x interest = personal allowance?

so assuming interest at 5% and a PO of 5500 you would have to have savings over £110000 before being classsed as a tax payer?

what i cant quite work out is the fact tax is only paid on an amount over the personal allowance. so if at the point of earning more interest than your allowance do you lose tax free status? if so you will only get interest paid net anyway, so pay tax on all savings, not just the amount over personal allowance?

crikey, i hope that makes sense and one of you brainy types can help out.

of course it may be as simple as you keep your interest at gross and pay any due tax yourself?

thanks in advance.

steady__eddie

Don't know the answer I'm afraid but an intrigueing point and a situation that I could well be in, in the foreseeable hence the reply.
I'm thinking that it is adviseable to have as much interest as possible coming from tax free products in order to maximise the total level of income receivable before HMRC take an interest ?
Perhaps a move to the tax saving forum may be imminent ?

cheerfulcat

pfpf wrote: »

but at what point would that person become a tax payer purely by interest earned on said savings?

is it simply once savings x interest = personal allowance?

so assuming interest at 5% and a PO of 5500 you would have to have savings over £110000 before being classsed as a tax payer?

Yes, assuming that the interest really was your only income.

what i cant quite work out is the fact tax is only paid on an amount over the personal allowance. so if at the point of earning more interest than your allowance do you lose tax free status? if so you will only get interest paid net anyway, so pay tax on all savings, not just the amount over personal allowance?

You would receive interest net of tax and then reclaim the overpaid tax from HMRC.

of course it may be as simple as you keep your interest at gross and pay any due tax yourself?

No, you can't register as a non-taxpayer if income exceeds the basic allowance.