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    • cisko65
    • By cisko65 16th May 19, 6:07 PM
    • 55Posts
    • 4Thanks
    cisko65
    tax free
    • #1
    • 16th May 19, 6:07 PM
    tax free 16th May 19 at 6:07 PM
    I'm trying to understand whether it would be more convenient to open another cash ISA or a saving account, which usually have better interest (already have high interest current accounts).
    I know that:
    - ISA is tax free
    - One doesn't pay tax on up to 1000 interest from saving accounts.
    I am a low earner, well below the 12,500 personal allowance. In case I get more than the tax free 1000 interests from saving accounts, let's say 1500, would I have to pay tax on the 500? Or would it be considered as a form of earning (so within the personal allowance)?
    Thanks.
Page 1
    • eskbanker
    • By eskbanker 16th May 19, 6:23 PM
    • 10,351 Posts
    • 12,590 Thanks
    eskbanker
    • #2
    • 16th May 19, 6:23 PM
    • #2
    • 16th May 19, 6:23 PM
    On the basis of what you've posted, you'll be able to benefit from the starting rate for savings (protecting up to 5K of interest from tax for low earners) before needing to consider the lower 1K personal savings allowance, so there's no need to worry about paying tax on non-ISA savings in your scenario....

    https://www.gov.uk/apply-tax-free-interest-on-savings
    • xylophone
    • By xylophone 16th May 19, 7:15 PM
    • 29,799 Posts
    • 18,234 Thanks
    xylophone
    • #3
    • 16th May 19, 7:15 PM
    • #3
    • 16th May 19, 7:15 PM
    On the basis of what you've posted,
    On the basis that the OP is

    a low earner, well below the 12,500 personal allowance.
    she probably would not even need to take advantage of the "starting rate for savings"?
    • Dazed and confused
    • By Dazed and confused 16th May 19, 7:25 PM
    • 4,896 Posts
    • 2,547 Thanks
    Dazed and confused
    • #4
    • 16th May 19, 7:25 PM
    • #4
    • 16th May 19, 7:25 PM
    One doesn't pay tax on up to 1000 interest from saving accounts.
    The 1,000 isn't something lower earners can use.

    As others have said you have to use both your spare Personal Allowance and savings starter rate band before you can make use of the savings nil rate of tax (aka Personal Savings Allowance).
    • cisko65
    • By cisko65 17th May 19, 10:52 AM
    • 55 Posts
    • 4 Thanks
    cisko65
    • #5
    • 17th May 19, 10:52 AM
    • #5
    • 17th May 19, 10:52 AM
    Thank you all.

    Please let me check I understood correctly on the basis of everybody's advice:

    As in 2019/20 my earnings will - very probably - be 7000, I will not have to pay any tax.
    I calculated the probable 7000 income as 6000 wages + 2000 interests on savings (the interests would come from opening a high interest Fixed Term saving account or deposit, rather than keeping my ISA).

    Are these calculations correct?
    Thanks.

    I have another query about a deposit with ICICI bank or a Sharia compliant investments. I will do a new post.
    • Dazed and confused
    • By Dazed and confused 17th May 19, 11:03 AM
    • 4,896 Posts
    • 2,547 Thanks
    Dazed and confused
    • #6
    • 17th May 19, 11:03 AM
    • #6
    • 17th May 19, 11:03 AM
    No offence but 6,000 + 2,000 is 8,000 not 7,000.

    But either way if your total taxable income is either 7,000 or 8,000 then you will have no tax to pay

    And don't need to worry about the Personal Savings Allowance etc as they are not relevant to you.
    • eskbanker
    • By eskbanker 17th May 19, 11:22 AM
    • 10,351 Posts
    • 12,590 Thanks
    eskbanker
    • #7
    • 17th May 19, 11:22 AM
    • #7
    • 17th May 19, 11:22 AM
    the interests would come from opening a high interest Fixed Term saving account or deposit
    Originally posted by cisko65
    Unless you're going for a term of less than a year then chances are you won't receive any interest on that during the 2019/20 tax year anyway, i.e. it becomes a matter for 2020/21....
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