Tax on savings and dividend income

[Yants]

Hopefully this is straightforward question with a straightforward answer, but for someone who has ZERO other income, no earnings, no pension etc, at what figure would their income from

a.) Cash Savings
b.) Investment Dividends

Be taxable?

Just trying to work out if I need to open an ISA for either my cash savings or investments or if my returns are so low there's no point!

IMO there's always a point to put savings into an ISA wrapper, to use up you maximum annual allowance.

You could request a tax code from HMRC, which gives the tax office your allowance before tax is payable which is currently £12,570. That's the amount you'd have to earn from your savings before tax is payable.

Caveat being none of us know your exact circumstances so the above is a general simplistic rule of thumb only with no visibility of your personal finances. Getting the code is the most reliable way of knowing for certain,

Interest and dividends from ISAs are always tax free so makes sense to utilise the £20k a year no matter your income.

Otherwise there is the £12,570 personal allowance, the £1,000 savings allowance and then the £2,000 dividend allowance.

There’s also that starting rate for savings which is £5,000. So you could potentially have £19,570 of investment income before you start paying tax but you’d have to be careful about the split. If dividends exceeded the personal allowance and the dividend allowance then they would be taxed at 8.5%, even if this was below £19,570 as the starting savings rate and savings allowance are only for interest.

Thank you for the replies, as I said, my personal circumstances really are as straightforward as I've already outlined... ZERO other income just purely living off savings/investment income and capital.

So basically my personal allowance of £12,570 still applies? I thought that figure only applied to Income Tax through actual earnings.

I suppose it does still make sense to have an ISA, although my combined savings and investments income is no where near £12,570!

Your personal allowance applies to any income, including from investments. The savings and dividend allowances are on top of that.

Part of my job relates to personal finance. I'd recommend investments always go in a stocks and shares ISA as you pay no capital gains tax or income tax on dividends. Particularly given the CGT allowances are halving in each of the next two years.

Cash ISA rates are usually lower than non ISA savings accounts so if you have no other income, don't bother with the cash ISA. MoneySavingExpert has a calculator which lets you work out the cash ISA return based on your marginal (highest) tax rate.