How does Tax on Savings Income Work?

[@malacca1951]

Thanks! Your video was incredibly helpful. I have worked out that I WILL need to pay tax in this tax year because of increases to state-pension, small private pension and increased savings interest. The links you included are going to be helpful (I hope) as I am trying to find out why HMRC have started to take Tax from a Private Pension each month despite me not yet having submitted a Self-Assessment Form. I guess it's because they estimate what future tax might be though I don't understand how they can know if interest/bank rates will rise or fall! Thanks again!

[@LindaGray-o7j]

What angered me was, each year my state pension increased, the tax on my personal pension also increased 🤨

[@malacca1951]

@@LindaGray-o7j Me too! But I hope you've got any spare cash saved in an ISA ? Premium Bonds are tax-free of course (but if you win a million you would probably put it in a savings account and have to pay tax again! The answer is to spend it!) I think the ISA system will be overhauled in the Budget soon....I hope so!

[@LindaGray-o7j]

@@malacca1951 My ISA ended it's first year on September. I took out £10,000 leaving the £537 interest it earned. I also took out £7,500 from my account, leaving just under £2,500 in it. I don't trust Reeves 😠 I don't claim benefits of any kind as my pension ( I worked full time for 54 yrs ) is £1,088 monthly plus I have a personal pension of £128 monthly, taxed steadily down from near £200 a few yrs ago. I'm 77 yrs old living on my own, mortgage free since 2021. I'm obviously not destitute, just angry at still paying tax and expecting to pay even more after the budget!!! Out of interest, up here 🏴󠁧󠁢󠁳󠁣󠁴󠁿 our "wonderful" SNP have again raised the unit price on alcohol on the pretence that too many alcoholics are dying. Another money grabbing ruse is more like it!!! A 70cl bottle of spirits has jumped from average £13.15 to £17.07 Beer & cider have followed suit. I buy a 6 in a box bottles of Weston's Vintage Cider in ASDA every Friday at £12.30 it's now £15.99. In England it costs under £9.00. It also enrages me to see everyone's tax money spent on illegals & sent abroad to other countries when it should be used for the benefit of our own country and it's population 🤬

[@miraflorova8487]

On the Self-Assessment Tax Return form under the section 'Tailor your return', Page 2 of 3 there is a question: ''Did you receive any interest, for example, from UK banks, UK building societies, UK unit trusts ( or untaxed foreign interest up to £ 1000)? YES or NO? If you have a regular savings account ( NOT an ISA account ) you will always earn some interest no matter how much it will be. Does that mean that I need to answer the question above 'YES' even if I earn interest below the £1000 threshold ( the personal savings allowance for basic taxpayers)? I would be really grateful if someone could clarify this for me. Thank you.

[@healthyforpurpose1898]

Hi what if I have saving in my bank but don’t earn any interest

[@stephencole9289]

If interest comes from a joint account (with one partner as higher rate tax payer and the other a non-earner), is any interest considered split 50-50 ?

[@stephencole9289]

Answer from gov.uk "If you have a joint account, interest will be split equally between the account holders"

[@ourATT]

Interest earned in a joint account held by a married couple, or a couple in a civil partnership will be split 50:50 between them by default. However it may be possible to elect for another treatment - see www.litrg.org.uk/savings-property/tax-savings-and-investments/joint-income-savings. If the holders of the account are not married or in a civil partnership, then any interest earned should be split between them based on how much they put into the account.”

[@oldmukker]

What starting rate?

[@ourATT]

The starting rate of tax is a 0% rate which can apply to up to the first £5,000 of savings, provided your other income is under a certain threshold. It's not covered in the video above, but there are more details on the Low Incomes Tax Reform Group website - www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income/starting-rate-savings

[@Thetoon25]

Hi all Just to clarify matters given I've been sent my interest / tax for the 2023/2024 year. I'm due to pay £52.80 I have two options a) pay outright b) in the 2025/2026 tax year is is taken off in 12 installments from my pay. Hope this helps matters undertand how and when it goes out / paid

[@geofflancaster8542]

Stating the threshold for the reduction of savings interest allowance as a fixed earnings amount is ridiculously incorrect. It occurs when £37,700 income has been received above your personal allowance, changing you income tax rate to 40%.

[@PAULC3456]

How come as an expert you fail to mention the 5k ‘starting rate for savings’?

[@ourATT]

We explain in the video that we are not covering the starting rate for savings - but you can find more details here www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income/starting-rate-savings

[@MrSJT]

I thought that too, but watched the video again, she specifically said that isn't covered here and said there is a link below the description if we want to know more, it does mention what you've just said

[@mikegibbs210]

High interest rate didnt last long !!!