£5k interest tax free on savings?

[MrOrange]

Reading https://www.gov.uk/apply-tax-free-interest-on-savi... states:

"Starting rate for savings
You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings.

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be."

So, as I understand it. If you're not earning over your tax allowance (£12.5k) - say retired early - and living off cash savings, ISAs, Premium Bonds, and pulling less than £12.5k from your SIPP then you can "earn" £5k per annum in interest. If there's two of you, that's £35k "income" tax free.

I am assuming you can also use your 25% tax-free allowance on your SIPP so potentially an extra £4k tax free for each giving a net income of £43k without paying any tax for a couple. Surely that is not right?

[bogie]

Yes I think (and hope) you are correct, the personal allowance is really £17.5k a year each so long as £5k is coming from interest on savings and you have no other taxable income.

You also have £500 a year each dividend allowance...and could potentially earn £3000 each from earnings in a GIA before paying CGT.

So the optimal strategy is to distribute cash between savings account, GIA, SIPP to meet the amounts required to use all the tax free allowances available, then you also have premium bonds and ISA holdings which are tax free anyway

[Richonenope]

Plus £1000 allowance for savings too if Basic Rate or lower as well as £5,000.