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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 2nd Apr 15, 4:26 PM
    • 75Posts
    • 44Thanks
    MSE Helen Saxon
    Tax Free Savings Guide
    • #1
    • 2nd Apr 15, 4:26 PM
    Tax Free Savings Guide 2nd Apr 15 at 4:26 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,


    MSE Helen
Page 4
    • murphydavid
    • By murphydavid 27th Jul 18, 5:27 PM
    • 620 Posts
    • 143 Thanks
    murphydavid
    Thanks Dazed and Confused. So regarding National insurance and student loan repayments, savings interest are just seen as profits? and the £1000 allowance for basic rate tax payers has nothing to do with these?


    So you could still get 9% NI tax and 9% student loan repayments on savings interest above £0? (once over your NI allowance, repayment threshold etc?
    Originally posted by jonon
    I believe that the answer is no. Savings interest are seen as savings interest and are taxed at 0% on the first £1000 (or first £5000 see https://www.moneysavingexpert.com/savings/tax-free-savings/) and 20% on the rest. Banks no longer pay the tax at source.
    Student loan repayment deductions are made from the net pay/profit after tax and national insurance has been calculated and deducted but the calculation of the deduction is based on the gross pay/profit (before tax and NI) for the pay period. No deduction will be made if the statutory threshold is not exceeded. see https://forums.moneysavingexpert.com/showthread.php?t=3913511

    In addition (depending on the type of work you do) you may and probably will have tax free expenditures related to your work / company. (for instance self employed child minders get see https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim52751) A complicated field. You may even want to start a company and make yourself an employee and pay yourself a low salary and plow your profits back into your company (for which you may want an accountant)

    Its been a while since I retired but I have never included interest in my profit line on my tax return. Maybe things changed. Can't you tell by looking at the tax return form?
    Last edited by murphydavid; 27-07-2018 at 6:05 PM.
    • Vaux
    • By Vaux 2nd Aug 18, 1:33 PM
    • 1 Posts
    • 0 Thanks
    Vaux
    Hi. You refer to earnings below £17850, but what is classed as earnings? For example, private pension income and state benefit?
    • murphydavid
    • By murphydavid 2nd Aug 18, 2:33 PM
    • 620 Posts
    • 143 Thanks
    murphydavid
    Hi. You refer to earnings below £17850, but what is classed as earnings? For example, private pension income and state benefit?
    Originally posted by Vaux
    pension income both private and state is added to income in the tax calculation.
    Stare benefits are or are not taxed as described here https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits
    • Yorkshire Pud
    • By Yorkshire Pud 9th Feb 19, 1:13 PM
    • 976 Posts
    • 658 Thanks
    Yorkshire Pud
    The original article linked in opening post says in the first sentence "you can register to receive savings interest without paying tax on it"

    You do not have to register HMRC decide if you qualify or not so unless they make a mistake you don't need to inform them and you shouldn't miss out if you don't "register" as there is no requirement to do so.

    Correct me if Im wrong
    • curls
    • By curls 27th Apr 19, 9:41 AM
    • 156 Posts
    • 160 Thanks
    curls
    Thank you for your post Yorkshire Pud. I was thrown by this article and have spent the last hour searching for details on how to register! Now I can get on with contacting HMRC to find out why my tax code has been reduced to collect tax on interest when my earnings (earned and savings interest) are well below the allowances.
    • Dazed and confused
    • By Dazed and confused 27th Apr 19, 11:13 AM
    • 4,889 Posts
    • 2,535 Thanks
    Dazed and confused
    Thank you for your post Yorkshire Pud. I was thrown by this article and have spent the last hour searching for details on how to register! Now I can get on with contacting HMRC to find out why my tax code has been reduced to collect tax on interest when my earnings (earned and savings interest) are well below the allowances.
    I think you have misunderstood your tax code.

    I think it is highly unlikely your new tax code is making you pay tax.

    If you have low income your taxable savings income will not attract any tax liability because you have spare tax allowances. That is probably what had happened in your case.

    In this situation you cannot make use of the Personal Savings Allowance (which is actually a 0% tax rate).

    Contacting HMRC won't change that and will probably only confuse you even more.

    Can you confirm what you expect your taxable income is to be in 2019:20 and how it is made up between pensions, savings interest etc.

    And what your current tax code is for 2019:20.
    • Dazed and confused
    • By Dazed and confused 4th May 19, 10:57 AM
    • 4,889 Posts
    • 2,535 Thanks
    Dazed and confused
    Was your pension income actually greater than £12,500??
    • Dazed and confused
    • By Dazed and confused 4th May 19, 11:40 AM
    • 4,889 Posts
    • 2,535 Thanks
    Dazed and confused
    Then you do realise that your tax code should be reduced to take into account some, or all, of your taxable savings interest.

    What did you think was wrong with your tax code?
    • Dazed and confused
    • By Dazed and confused 4th May 19, 11:59 AM
    • 4,889 Posts
    • 2,535 Thanks
    Dazed and confused
    Unfortunately you have misunderstood how tax codes are calculated.

    If your pension income is less than your Personal Allowance then the savings starter rate of tax does not apply to all your savings interest. It is only available for the amount over and above your unused Personal Allowance.

    So for example if your pension income (from one source to make things easier) was say £11,800 and savings interest was £2,000 your tax code should be made up as follows,

    Personal Allowance £12,500
    Less interest £700
    Tax code allowances £11,800
    Tax code 1180L

    Pension income £11,800 and tax code 1180L = no tax to be deducted

    The remaining £1,300 savings interest needs to be taxed but at the savings starter rate of 0% so no tax actually payable.
    • Daisymaisy
    • By Daisymaisy 21st May 19, 1:46 PM
    • 195 Posts
    • 446 Thanks
    Daisymaisy
    Hi, I wanted to double check my understanding as I am trying to help my dad with some investments. He has the following income:

    State pension £12204 per year
    Private annuity £689.40 per year
    Tax code duly adjusted by HMRC to 29L to take into account that £296 of his annuity is tax free. He therefore pays 20% income tax on £393.40.

    By my calculation my father can then earn savings interest at 0% tax rate as follows:

    £4606.6 starter savings rate (£5000-393.40)
    £1000 personal savings allowance

    I would appreciate it if someone can confirm if I have understood this correctly.

    Many thanks
    • Dazed and confused
    • By Dazed and confused 21st May 19, 7:41 PM
    • 4,889 Posts
    • 2,535 Thanks
    Dazed and confused
    Assuming you haven't forgotten any other income then it looks spot on.
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