Tax a few questions
Discussion
I know that we have a personal allowance of £12570 every year and as I'm working and paying PAYE this I believe is used against my salary ?
So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
Narcisus said:
I know that we have a personal allowance of £12570 every year and as I'm working and paying PAYE this I believe is used against my salary ?
So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
You only need to tell HMRC if you get more than £1k interest in a standard savings account. If its in an ISA wrapper it's tax free and no need to tell HMRC at all.So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
No idea how you would get an 18k allowance. Sounds very odd. I'm retired and my allowance is the same as any other working person.
Pension is treated as income. When you say savings I assume you mean interest from savings? If so there is the 1k allowance, and then you can use your normal tax free allowance if your pension income didn't use it.
98elise said:
Narcisus said:
I know that we have a personal allowance of £12570 every year and as I'm working and paying PAYE this I believe is used against my salary ?
So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
You only need to tell HMRC if you get more than £1k interest in a standard savings account. If its in an ISA wrapper it's tax free and no need to tell HMRC at all.So lets say I'm happy to accept around 4% interest on savings for an easy life and want the interest paying monthly so open a few joint accounts with well known financial institutions or stick it in NS&I Bonds for a year.
Will I need to inform HMRC how much interest we have earned over the year or is this usually done automatically ?
If I have to do it is it easy enough ?
Lets say I decide to retire early ......
I've read that under some circumstances the tax free allowance can be over 18k but I don't really understand it.
Is the 18k allowance only available if you are not working and have zero income ?
Are pensions and savings both classed as income ?
No idea how you would get an 18k allowance. Sounds very odd.i'm retired and my pension and investment income gets taxed the same as if I was working (except no NI).
Pension is treated as income. When you say savings I assume you mean interest from savings? If so there is the 1k allowance, and then you can use your normal tax free allowance if your pension income didn't use it.
Yes would be more than 1k but interest would be paid monthly could I do that with an ISA and not pay tax on the interest ? Sorry I'm a newb at this !! We don't currently have any ISA's so could only use 40k this year ?
OK Must have got the wrong end of the stick with the 18k.
I have a couple of Pensions one I'm already drawing but they would be less than 12k a year combined if I took both I know the one I'm currently drawing is taxed at source.
So there is the £12570 for Pension income then £1k separately for savings interest so a total of £13570 to offset against any Pension and savings ?
You have to do a self assessment if your savings income is greater than £10k.
In theory the banks do tell HMRC. It's never happened for me, but my partner's banks started to tell HMRC last year what her income was. It's not 100% accurate as they were several hundred £ off from her actual total. You can see the figure if you look at your personal tax account on the HMRC website
An £18k personal allowance can exist based on;
£12K Standard Personal Allowance
£1k Personal savings allowance (or £500 if you're a higher rate tax payer; £0 if your on the additional tax rate)
£5k starting rate for savings (which is currently set at a 0% tax rate)
£18k Total
But, the £5k starting rate for savings is reduced by £1 for every £1 you earn above the personal allowance of £12,570.
In theory the banks do tell HMRC. It's never happened for me, but my partner's banks started to tell HMRC last year what her income was. It's not 100% accurate as they were several hundred £ off from her actual total. You can see the figure if you look at your personal tax account on the HMRC website
An £18k personal allowance can exist based on;
£12K Standard Personal Allowance
£1k Personal savings allowance (or £500 if you're a higher rate tax payer; £0 if your on the additional tax rate)
£5k starting rate for savings (which is currently set at a 0% tax rate)
£18k Total
But, the £5k starting rate for savings is reduced by £1 for every £1 you earn above the personal allowance of £12,570.
uknick said:
You have to do a self assessment if your savings income is greater than £10k.
In theory the banks do tell HMRC. It's never happened for me, but my partner's banks started to tell HMRC last year what her income was. It's not 100% accurate as they were several hundred £ off from her actual total. You can see the figure if you look at your personal tax account on the HMRC website
An £18k personal allowance can exist based on;
£12K Standard Personal Allowance
£1k Personal savings allowance (or £500 if you're a higher rate tax payer; £0 if your on the additional tax rate)
£5k starting rate for savings (which is currently set at a 0% tax rate)
£18k Total
But, the £5k starting rate for savings is reduced by £1 for every £1 you earn above the personal allowance of £12,570.
Great info thanks !In theory the banks do tell HMRC. It's never happened for me, but my partner's banks started to tell HMRC last year what her income was. It's not 100% accurate as they were several hundred £ off from her actual total. You can see the figure if you look at your personal tax account on the HMRC website
An £18k personal allowance can exist based on;
£12K Standard Personal Allowance
£1k Personal savings allowance (or £500 if you're a higher rate tax payer; £0 if your on the additional tax rate)
£5k starting rate for savings (which is currently set at a 0% tax rate)
£18k Total
But, the £5k starting rate for savings is reduced by £1 for every £1 you earn above the personal allowance of £12,570.
The tax allowance of £12,570 is a single allowance for offset against ALL your income. If you have two sources of income that are taxable under the PAY
E system, such as two pensions or a pension and a salary, the £12,570 is offset against the combined pension and salary.
If you have investment income from interest and/or dividends you get some additional allowances to go against that income only.
E system, such as two pensions or a pension and a salary, the £12,570 is offset against the combined pension and salary.
If you have investment income from interest and/or dividends you get some additional allowances to go against that income only.
Eric Mc said:
The tax allowance of £12,570 is a single allowance for offset against ALL your income. If you have two sources of income that are taxable under the PAY
E system, such as two pensions or a pension and a salary, the £12,570 is offset against the combined pension and salary.
If you have investment income from interest and/or dividends you get some additional allowances to go against that income only.
Thanks Eric I'm getting there how much do you charge for a personal consultation ? E system, such as two pensions or a pension and a salary, the £12,570 is offset against the combined pension and salary.
If you have investment income from interest and/or dividends you get some additional allowances to go against that income only.
It sounds like the pension you are in receipt of is less rhan the £12570 annual allowance?
If so and if you have the opportunity then it would make sense to draw upto that limit from taxable earnings.
I e. Use the annual allowance in full each year even if you don't need the income as it will jow be taxed income but at zero rate as its within your allowance.
Yes use the £1000 pa Personal Savings allowance too for interest.
And the there is the Starting Rate allowance of £5k investment income giving a total in excess of £18k tax free each year and your partner can do the same.
Have a read of this as it probably explains it better
https://www.moneysavingexpert.com/savings/tax-free...
If so and if you have the opportunity then it would make sense to draw upto that limit from taxable earnings.
I e. Use the annual allowance in full each year even if you don't need the income as it will jow be taxed income but at zero rate as its within your allowance.
Yes use the £1000 pa Personal Savings allowance too for interest.
And the there is the Starting Rate allowance of £5k investment income giving a total in excess of £18k tax free each year and your partner can do the same.
Have a read of this as it probably explains it better
https://www.moneysavingexpert.com/savings/tax-free...
uknick said:
In theory the banks do tell HMRC.
Yes, banks and other financial institutions are obliged to file a lot of information with HMRC and it's an easy job for HMRC's big computer in the sky to match, or roughly match, that information against what you report on your Self Assessment. In other words, HMRC knows whether the income you're declaring is in the right ball-park, however many sources of income you may have.This from the Lloyds Bank website and NB the points already made above about Self Assessment,
"Paying tax on savings interest
"Banks and other financial institutions report all interest to HM Revenue & Customs (HMRC) at the end of each tax year. If you’re employed, or you receive a pension, HMRC may simply change your tax code, so interest is taxed automatically.
"If you complete a Self-Assessment Tax Return, you should report all earnings, including any interest earned on savings, before calculating and paying any tax due."
Gassing Station | Finance | Top of Page | What's New | My Stuff