Tax on savings - please help!

[Pablosdog]

How much interest can I earn on my savings each year without paying any tax on it? Is it 1k of interest or 5k? I earn around 10k a year working part time.

I inherited recently and have put the maximum amount of money I can put into an ISA this year and Premium Bonds, but the remaining amount in savings may earn 3-4K in interest each year. I want to avoid being taxed on it if possible. Any help gratefully received!

Why should you avoid paying tax?

You should be fine.
https://www.gov.uk/apply-tax-free-interest-on-savings

Well it depends on how much left you have of your personal tax free allowance after your job?. If its 2500 left then you should be fine as you get 1k tax free on interest as a basic rate taxpayer on top of your personal rax free allowance.

Stupid question. But in my case a lot was taken in inheritance tax, I’d like to avoid more of my parents hard earned money being diminished through tax.

My above comment was to BIWI. Thanks to others for their considerate and helpful responses

You are on a low salary so there’s still room. You get 1k + 12k tax free. If any inheritance is for children, might be a good idea to get it into their name as they have their own allowances

Sorry if you think it's a stupid question - but we do all need to pay tax, even if we don't like it! And if you're going to earn £3-4K a year in interest, then you must have plenty of money, so you can afford to pay the tax.

However, your best bet would be to consult an IFA who can advise you properly on tax-efficient investments.

It’s a stupid question because most people don’t want to pay tax on whatever savings they have, however wealthy you presume them to be. For the record I’m not and all the savings will go on care costs so the more I can preserve the better.

I HATE THIS response. It is so ill informed. You should absolutely avoid tax. You should never evade tax.

I find it laughable that someone earning 3-4K interest is considered to earn enough to pay, meanwhile your 1% is avoiding it at all costs and making 3-4K a day. Lol.

Which is why you need to see an IFA.

Who - as I said @Nailswithhearts - will advise on tax-efficient ways to invest - i.e. avoidance and not evasion.

First you use your personal allowance, so £12570, £10k is already used so you have £2500 left for untaxed savings interest but the starting rate is £5000 for savings interest for low earners.
PLUS your personal savings allowance of £1000.
So I think you get £6k allowance but I’m not 100% sure.

Why don’t you put it in your pension and get the government uplift (tax relief). Free money to boost your savings. You can take it out to pay for care costs at later date? Or do you need it before you’re 55/57?

You really don't need an IFA to advise on this. It is savings, it is pretty simple that you should want to maximise your returns and minimise your tax obligation through the legal means available to you.

So you can earn £1k in interest a year via savings if a basic tax payer. if anyone goes above that they would be an idiot not to protect that in some kind of tax wrapper such as an ISA.

@Hitchens As PP have said, the OP can get more than that tax-free, as her other income is below her Personal Allowance.

OP won’t be taxed at all on £4k interest.

The most untaxed earnings + starting rate interest you can get in a year if you are low income is £17570 ( £12570 + £5000) then you also get the £1000 PSA.

So £18570 untaxed income for a low earner. This is according to the Money helper website.

If you Earn £17570+ then all you get is £1000.

Earnings between £12570 and £17570 are tapered for starting rate, soif you earn £15k then you would have £3k + £1k as you’ve used £2k of the allowance in earnings over the £12570 personal allowance.

It just shows how confused people get over the £1k headline.

That’s why many people put money in spouse savings when they are non earners, gifts between spouses are never taxable.
There is also a massive downside of doing this, obviously moreso in later years.

Actually most people with a decent social conscience and an understanding of how things work will pay the tax they're due to pay.
You need to look at yourself. You may earn £4k a year interest (so money for doing nothing yourself at all) and don't want to pay 20% tax on that income? So you'll still have £3k left for doing nothing. But you think that's unfair?

Nobody is going to willingly pay tax that they don’t legally have to pay.
Now that the lifetime allowance has gone, huge earners can get 40% tax relief on unlimited amounts of money going into their pension.

Yet they are planning to completely remove the allowance for inheriting your spouse/parents pension tax free should they die under the age of 75, even if it’s only small.

Oh give over for fuck sake, the OP isn't going to volunteer to pay tax they don't need to pay. Why would anyone want to do that?

If you want to sit on that high horse I hope you're voluntarily paying tax on ALL your income too, if you don't think the OP should be able to use her personal allowance I assume you're not using yours either?

You think it’s fair that we are taxed when we earn, are taxed when we spend, are taxed when save, and are taxed when we die? Seriously?! I do have a social conscious and I can see how crippling that is for many.

Thank you. My mind boggles, it really does!

When you die, the money isn’t yours anymore.

we need an honest conversation about tax and why we pay tax. It’s to fund services. Sadly, we’ve had the drip drip message for the last 50+ years that tax is something to be avoided at all cost - because of the Thatcherite vultures creaming off the best of our public services.

However - OP - speak to a IFA about how to invest your money for maximum return, and any tax avoidance will be secondary.

I will add. Speak to an IFA who can set out why you’re saving and when for. Do you want money accessible now, or locked away for a while?

Tax avoidance kicks in when you’re looking at your gains and when you realise them.

The most tax efficient savings are ISAs as you don't pay tax on interest. So after maximising your ISA allowance this tax year (and premium bonds), look to put another £20k in an ISA next tax year which starts April 24. And so on and so forth depending how much you have to put away. After you have used your tax free allowance of around £12k a year, you can then earn £1k a year of interest tax free.

Wrong. again 🙄