Help with taxation of loan interest when no income

[robbo777]

I retired during the tax year 2016-17, and was still a taxpayer that year. During that year I made a loan to my son and he is paying me back over 5 years with 5% interest. I also have some savings interest and it all adds up to around £2k interest per year. In the 2016-17 tax year I earned over the £11,500 personal allowance, and so I had £1k of exempt interest and paid 20% tax on the other £1k interest.

In the current tax year, 2017-18 I have no taxable income apart from the £2k interest (and the capital repayment which is not taxable), and I know at least £1k of that interest is tax free. However, as I am not being paid any money from anywhere else, will the other £1k interest be tax free as well?

Also, I read something somewhere (not on this site) about being able to have £11500 of income tax free (up to the personal allowance) plus another £5k of interest tax free. Is that right, as I thought it was just the first £1k that was tax free?

I suppose what I am asking is whether, after the first £1k, interest is fully taxable, or whether it is counted as part of your personal allowance? As you can see, I am quite confused, so any clarification would be appreciated!

Thanks in advance

[pawncob]

https://www.gov.uk/apply-tax-free-interest-on-savings