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Post Info TOPIC: Tax on savings - £5.000 allowance


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Tax on savings - £5.000 allowance
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HI all,

Is anyone working with CCH and the new update for Tax year 2016/2017?

How do you calculate tax on savings?

We have tried to calculate the tax for a client receiving £11,000 as employment and £26,000 as interest on savings.

CCH did not include the £5,000 allowance and we think this is not right looking at HMRC guide.

Have anyone experienced that with CCH or other software?

Nina

 



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RE: Tax on savings - �5.000 allowance
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Based on what is taxable income - if you fall within BR you get 1000 HR 500 AR Sod all. CCH is right I'm afraid

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The 5000 is if it is the only 5000 taxable

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Tax on savings - £5.000 allowance
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Thank you Johnny but I am still confused!

Here is the HMRC guidance:

Starting rate for savings
You may also get up to £5,000 of interest tax-free. 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.

If your other income is £16,500 or more
Youre not eligible for the starting rate for savings if your other income is £16,500 or more.

If your other income is less than £16,500
Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Example
You earn £15,000 of wages and get £200 interest on your savings.

Your Personal Allowance is £11,500. Its used up by the first £11,500 of your wages.

The remaining £3,500 of your wages (£15,000 minus £11,500) reduces your starting rate for savings by £3,500.

Your remaining starting rate for savings is £1,500 (£5,000 minus £3,500). You dont pay tax on your savings interest.



In the example if we say wages 11,500 on the level of the personal allowance this means that the you are eligible of starting tax free allowance of £5,000. I am right?

Nina

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The 16,500 is before PA.

Which would give you in today's money - £5000.

16,500 - PA = 5000.

 

It depends on what the gross annual is.

 



-- Edited by abacus12345 on Friday 12th of May 2017 12:17:06 AM

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Master Book-keeper

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£20k interest income! So where are they investing? Could do with making a bit more in interest.

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If your other income is less than £16,500
Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.


Wages of £11,500 = other income less than £16,500

No other income above the personal allowance of £11,500 and the starting allowance of £5,000 is still non utilized.

If you have 10,000 in savings the first £5,000 should be free.

CCH skip this allowance and tax on the basic rate after £1,000 free allowance.

Still do not understand why?

Nina

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Forget other income.

If taxable income is below 5000 it's 0.

If your taxable income is below 32K the next 1000 of savings is 0.


Shoot me now if I'm wrong. Bang Bang.

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I've got to ask.

How much capital do you need in the bank to earn £5,000 in interest?

The Government knows this - people with cash invest.

Therefore your investment will really fall into dividends; top slice -

I can tell you, if relevant, my annual interest is approximately £3.





-- Edited by abacus12345 on Thursday 11th of May 2017 11:47:06 PM

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abacus12345 wrote:

I've got to ask.

How much capital do you need in the bank to earn £5,000 in interest?

The Government knows this - people with cash invest.

Therefore your investment will really fall into dividends; top slice -

I can tell you, if relevant, my annual interest is approximately £3.





-- Edited by abacus12345 on Thursday 11th of May 2017 11:47:06 PM


 A fair amount these days, given interest rates are so damned pitiful. There are ways and means if you want to tie up your cash, but still the rates are poor.

 



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Makes me LAUGHHHHH who earns £11,500 yet receives £5,000 in interest? Complete BS of a system.

Yes Mr. HMRC Officer,

Let me finish my admin/cleaning duties and I'll be with you.

Gets me sooooo mad.

Goggle, Amazon, Costa et al have their own HMRC team - and the law is fair.....

Anyway.



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abacus12345 wrote:

Makes me LAUGHHHHH who earns £11,500 yet receives £5,000 in interest? Complete BS of a system.




Nina said it was £20000 interest with £11000 employment income!!!!!!!

Are you just testing the system Nina? Something not right.

Any divis or anything else on there? 



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 Joanne 

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Hi

I have not had time to check this out properly but I must agree with what Nina has said

My understanding is that the 0% starting rate applies for interest income if "taxable non-savings income is less than £5000" as the client has only received £11,000 from employment and this is covered by the PA they will have no taxable non-savings income therefore the 0% starting rate should apply.

Maybe wrong but I am sure that is what I was taught, will have to double check later 



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Trouble was Doug, Nina actually suggested £20k interest income, but then mentions savings rather than interest and then switches to this year's tax allowance, when initially it was last years. I did hear of one software running interest income after divis in the calc, wasn't CCh though! I don't think. Can't remember which one now. Might have a mess about with Taxfiler later if I get the time. 



-- Edited by Cheshire on Friday 12th of May 2017 07:33:53 AM

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 Joanne 

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Hi Nina

Is it £26000 in interest or £26000 savings?  If the former that's over 1 million in savings, at the very least. (more likely over 2 million.

 

Hi Joanne

Just out of curiosity, where would you put your money?  For me (well not true as I would be investing in a business) it would be Funding Circle or Zopa*

 

* Not to be construed as financial advice. Investors should decide for themselves where to invest their money.



-- Edited by Leger on Saturday 13th of May 2017 01:22:56 PM

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I'd invest in business, property and slow growth stock - Cola, BP and such.

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Tax on savings - £5.000 allowance
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Not aimed at any reply in particular but the risk of these sort of posts is people reading the thread may confuse professionals talking about such matters as professional advice. Sorry to be a spoil sport but I have to add to this thread that no opinions voiced in this or any other thread should be constituted as advice. Investment is in many ways similar to gambling. You may get out less than you invested and even what seems the best advice can be compared to gambling at roullette (invest all your money and knock that up to Russian Roullette).

All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)



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Shamus wrote:



All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)


biggrin

Or was it cars and fast women! 



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 Joanne 

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Cheshire wrote:
Shamus wrote:



All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)


biggrin

Or was it cars and fast women! 


 Good point as most of them have managed to outrun me! lol.



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Shaun

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Hi All,

Thank you for all of your comments!

We were testing the system after the latest update. It might not be a real situation but we have to be sure our software is working right.
The example was for interest on savings of course and not savings :)

Still not sure if CCh is working right on tax on interest.

Nina




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NinaKoni wrote:

Hi All,

Thank you for all of your comments!

We were testing the system after the latest update. It might not be a real situation but we have to be sure our software is working right.
The example was for interest on savings of course and not savings :)

Still not sure if CCh is working right on tax on interest.

Nina



 Ive not tried taxfiler yet (I will try when I get a mo!)

What did the CCH support say? 



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

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Master Book-keeper

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Shamus wrote:
Cheshire wrote:
Shamus wrote:



All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)


biggrin

Or was it cars and fast women! 


 Good point as most of them have managed to outrun me! lol.


 Or been buried under the patio by all accounts!  I cant get hold of any quicklime in the whole of Staffordshire wink



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Master Book-keeper

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Shamus wrote:

All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)


 Nicking my jokes as well now lol.  Mine is slightly different as if I won the lottery I would spend a quarter on women, a quarter on wine, a quarter on gambling, and would squander the rest!!



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Master Book-keeper

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Who are all these lucky ladies who have men spending money on them?



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position

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