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?
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.
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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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
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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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
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
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
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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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
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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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
All of my money has been studiously invested in fast cars and women. The rest I just wasted ;)
Or was it cars and fast women!
Good point as most of them have managed to outrun me! lol.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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.
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.
You should check out answers with reference to the legal position
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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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
