Tax query re interest

herra soul mob

herra soul mob

Winger
Was told by bank you pay tax on interest over 1k in the tax year ( was in bank last week with a different query and was talking to the person about isas etc . Is this irrespective of your personal allowance ( £12,570 ) ?
 


herra soul mob said:
Was told by bank you pay tax on interest over 1k in the tax year ( was in bank last week with a different query and was talking to the person about isas etc . Is this irrespective of your personal allowance ( £12,570 ) ?
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Personal Savings Allowance​

You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you’re in. This is your Personal Savings Allowance.

To work out your tax band, add all the interest you’ve received to your other income.

Income Tax bandPersonal Savings Allowance
Basic rate£1,000
Higher rate£500
Additional rate£0
 
herra soul mob said:
think Im getting confused with personal allowance and personal savings allowance
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Same goes for ISA income on your personal savings allowance.
The £1,000 p/a allowance reduces to £500 if you’re a higher rate tax payer or £0 additional rate.

The interest on your savings will be paid tax-free by the bank & you’d have to submit a tax return to pay any owed over & above the allowance.
 
Goat Eyes said:
Aye. I was a bit hasty in my reply
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Couple years ago you needed best part of £100k for it.

Do HMRC get an actual feed of data from FI’s when it comes from to calculating interest or capital gains from shares?

I’ve had to submit a self assessment for child benefit reasons the last few years but this will be the first time I’ve had any non PAYE earnings worth mentioning.
 
Jabberwocky said:
Couple years ago you needed best part of £100k for it.

Do HMRC get an actual feed of data from FI’s when it comes from to calculating interest or capital gains from shares?

I’ve had to submit a self assessment for child benefit reasons the last few years but this will be the first time I’ve had any non PAYE earnings worth mentioning.
Click to expand...

Yeah, I believe it's compulsory reporting requirement from them.
 
herra soul mob said:
think Im getting confused with personal allowance and personal savings allowance
Click to expand...

You get a personal allowance of 12570 where everything earned between nil and 12570 is tax free.

Interest is taxed at 20, 40 and 45% and follows your rate on taxation.

Depending on your tax rate you get the following nil rated saving amounts.

20% payer - £1000 is at 0%
40% payer - £500 is at 0 %
45% payer - £0.is at 0%

Once you have exceeded the 0%s the excess is taxed at your basic rate.

The only exception is, if the first 5000 of your taxable income is interest.

This is at 0% plus your 1000 or 500 of 0%

For example is say you had a state pension of 12570 and 6k of savings interest. There would be zero tax due.

The pension would take your personal allowance.

But the next 5k of your income is interest and there is a 5k allowance.

The remaining 1k would receive the 1000 nil rate allowance.

ISA interest is exempt from tax.
 
Wild Card said:
You get a personal allowance of 12570 where everything earned between nil and 12570 is tax free.

Interest is taxed at 20, 40 and 45% and follows your rate on taxation.

Depending on your tax rate you get the following nil rated saving amounts.

20% payer - £1000 is at 0%
40% payer - £500 is at 0 %
45% payer - £0.is at 0%

Once you have exceeded the 0%s the excess is taxed at your basic rate.

The only exception is, if the first 5000 of your taxable income is interest.

This is at 0% plus your 1000 or 500 of 0%

For example is say you had a state pension of 12570 and 6k of savings interest. There would be zero tax due.

The pension would take your personal allowance.

But the next 5k of your income is interest and there is a 5k allowance.

The remaining 1k would receive the 1000 nil rate allowance.

ISA interest is exempt from tax.
Click to expand...
cheer for that fits me scenario. its the exception bit that has clarified eveything
Wild Card said:
You get a personal allowance of 12570 where everything earned between nil and 12570 is tax free.

Interest is taxed at 20, 40 and 45% and follows your rate on taxation.

Depending on your tax rate you get the following nil rated saving amounts.

20% payer - £1000 is at 0%
40% payer - £500 is at 0 %
45% payer - £0.is at 0%

Once you have exceeded the 0%s the excess is taxed at your basic rate.

The only exception is, if the first 5000 of your taxable income is interest.

This is at 0% plus your 1000 or 500 of 0%

For example is say you had a state pension of 12570 and 6k of savings interest. There would be zero tax due.

The pension would take your personal allowance.

But the next 5k of your income is interest and there is a 5k allowance.

The remaining 1k would receive the 1000 nil rate allowance.

ISA interest is exempt from tax.
Click to expand...
What if your monthly work pension ( too young for state pension ) plus interest earned in a year still came below 12570 ?
 
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SeahamMackem said:
Same goes for ISA income on your personal savings allowance.
The £1,000 p/a allowance reduces to £500 if you’re a higher rate tax payer or £0 additional rate.

The interest on your savings will be paid tax-free by the bank & you’d have to submit a tax return to pay any owed over & above the allowance.
Click to expand...

Surely, you don't pay tax on any interest earned from an ISA. That's what differentiates it from a regular saving account.
 
herra soul mob said:
cheer for that fits me scenario. its the exception bit that has clarified eveything

What if your monthly work pension ( too young for state pension ) plus interest earned in a year still came below 12570 ?
Click to expand...

Then no tax is due. If you had paid any tax at source through PAYE then that would be refundable.
 
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