Maximum Savings Interest before I need to pay tax

Hi, My annual private pension is £4,800 a year. I'm hoping to invest in NS&I savings and receive approximately a further £12,000 interest. I am not due to receive a state pension for 5 years and I am not employed. My tax allowance is £12570, can I then use the £5,000 Starter Rate for Savings and the £1,000 PSA to reduce any tax due? I've worked out my total income is probably about £16,800. Thanks

Hi,

You would be entitled to the starter rate due to the level of your non-savings income. You will be required to complete a Self Assessment tax return if your savings interest is above £10,000 in a year. You can see guidance here:

Tax on savings interest

Thank you.

Hi, my wife recently retired and has no pension or regular income. She is living off my private pension and her only income is interest on her savings. As she has no other income, I understand that she can receive up to £17,570 in savings interest without paying tax. Is this correct? Also would she have to submit a self assessment tax return if her savings interest is below £17,570. This is not clarified on the ‘Tax on savings interest’ information on the Gov.uk website. Thank you

Hi Terence Wilson,
That is correct.
If the interest generated is over £10,000 a tax return is required.
Thank you. 

I have bonds maturing in the future that will incur tax. If instead of having the interest paid I reinvest it all into another fixed term bond will I be liable for tax in the year it first matures? Or because I have not withdrawn any money will tax be due when the reinvestment bond matured in future years? Thanks

Hi Oliverps46 Oliver,
Saving bonds interest is taxed in the year that it is made available to the you as the customer.
Thank you.

I have no employment, pensions & I don't claim any benefits. My sole income is from interest on savings and share dividends. I have transferred the marriage allowance to my wife so my allowance would be £11310. Whilst checking online, I notice that my annual tax-free amount for 24/25 shows as being £9850 due to untaxed interest on savings and investments equalling £1460. Where would this figure come from? How much would I have to 'earn' from interest/dividends before I would start to pay tax? I thought it would be personal allowance plus £1000 equalling, for me, £12310.

Hi Paulie,
Banks and building societies send details of untaxed interest to HMRC after the tax year end.
This figure would be used as an estimate going forward in your tax code.
As you are not due to pay tax the interest is shown as a deduction in your tax code.
If your circumstances change and you were due to pay tax the personal savings allowance would then be included.
If you think your tax code is incorrect you can contact HMRC to review https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees Income Tax: general enquiries.
Thank you.

Hi I don't work and my income is £0, all I have is money in savings accounts and I plan to live off the interest from my savings. My personal allowance is £12,570 and am I correct in my understanding that I am entitled to a Starting rate for savings of £5,000 and I can have income from my savings of up to £17,570 (12570+5000) tax free? Thank you.

Hi Nataliya,
Yes that would be correct.
Thank you.

Hi there I have an LPA for my Grandad and am trying to work out whether I need to do a tax return for him for 23/24. I have calculated that he earned income of £20500 from two company pensions and his state pension. He also earned £3750 in savings interest and £40 in dividends. I am planning to try and get better interest rates for his savings account but not sure how much he can earn in interest before I have to do a tax return for him. Many thanks

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Hi Jeannie
Based on that information your grandfather would not meet the criteria for Self Assessment. You can check the Self Assessment criteria at:
Check if you need to send a Self Assessment tax return
Thank you.

My wife pays no income tax as her only income is her State Pension of £5374. This has allowed her to arrange a Marriage Allowance Transfer to me. She does have savings that currently generate over £5000. I realise she can use the Starting Savings Allowance of £5000 and Personal Savings Allowance of £1000 meaning no tax would be due. However I believe where income is below the Personal Tax Allowance of £12570 the difference between this and the income, can be added to the tax free savings allowance. This allows savings interest of more than £6000 to be untaxed. For example using my wife’s figures: Personal Allowance £12570 Less: Income (State Pension) £5374 Marriage Allowance Transfer. £1260 (minus) £6634 Leaving Personal Allowance (equals) £5936 Add: Starting Savings Allowance £5000 Personal Savings Allowance. £1000 (add) £6000 Amount of savings interest tax free £11936 Am I correct? At what stage would a tax return be required? I would welcome advice and thank you in advance. Apologies, but I was unable to complete the maths in any other way!

Hi 2005WL mearns,
Yes your wife would be entitled to the starting rate for savings and personal saving allowance.
Details online at Tax on savings interest.
A Self Assessment would be due if the untaxed savings interest was more than £10,000.
You can check if you meet Self Assessment criteria at Check if you need to send a Self Assessment tax return.
Thank you.

Hi, I will have a private pension of £14,795 after tax. Plus interest of savings approx £7,000. When calculating amount of tax to be paid on my savings interest should I be using the gross value or net value of my pension?

Hi June Johnston,
To confirm, it will be the gross value. 
Thank you. 

Hi, My wife has total wages of £11,500, UK savings interest of £2,770 and foreign savings interest of £1,400. Please may I ask whether her both UK and foreign savings interest can be benefit from the starting rate for savings allowance of £5,000? Many thanks.

Hi Johnny
Yes, untaxed foreign interest and savings interest from the UK can be covered by the Starting Rate for Savings.
Thank you. 

 

Hi, I currently have a full time job with the basic tax rate of 20%, all pretty straight forward but have invested savings into fixed bonds which pay out approximately £12000 per year in interest. Will my tax code automatically be adjusted under PAYE or do I need to contact the HMRC? There are a lot of conflicting numbers on the internet of what can be earned before being taxed on savings. How much can I earn in interest on my savings before paying tax? How will this tax be payed, through my PAYE tax code or by some other means?

Hi
You need to register for Self Assessment if your income from savings and investments is over £10,000. Further information is available here:
Tax on savings interest