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Where Taxpayers and Advisers Meet

Starting rate band

SuperSpurs106
Posts:24
Joined:Wed Jun 15, 2022 3:25 pm
Starting rate band

Postby SuperSpurs106 » Tue Feb 14, 2023 12:39 pm

Hi, I have a client with the following income:

State pension - £8,032
Savings income - £7,600

Am I right in thinking that they would qualify for the full SRB meaning no tax to pay on account of the personal allowance and starting rate band?

Fasteddie
Posts:22
Joined:Fri Nov 05, 2021 12:21 pm

Re: Starting rate band

Postby Fasteddie » Thu Feb 16, 2023 11:55 am

Yes as the Personal allowance will account for the pension and £4,538 of the savings interest leaving £3,062 of savings interest above the personal allowance and that is covered by the £5,000 starting rate for savings at 0%.

chambersiain
Posts:41
Joined:Sun Feb 06, 2022 4:58 pm

Re: Starting rate band

Postby chambersiain » Wed Apr 26, 2023 3:55 pm

Thank you for the worked example. What if the same person had UK Dividends of £5,000 in the same year. Are they added to in the pension income or treated after the calculation you have just completed?

D&C
Posts:178
Joined:Mon Nov 25, 2019 11:35 pm

Re: Starting rate band

Postby D&C » Wed Apr 26, 2023 6:45 pm

In that situation you want to maximise both the savings and dividend 0% bands.

So total taxable income is £20,632. Less Personal Allowance £12,570 leaves £8,062 to be taxed.

£5,000 x 0% (savings starter rate band)
£1,000 x 0% (savings nil rate band)
£1,000 x 0% (dividend nil rate band)
£1,062 x 8.25% (dividend basic rate band)

The Personal Allowance would be split,
State Pension £8,032
Interest £1,600
Dividends £2,938

D&C
Posts:178
Joined:Mon Nov 25, 2019 11:35 pm

Re: Starting rate band

Postby D&C » Wed Apr 26, 2023 6:46 pm

Dividend basic rate should be 8.75%, not 8.25%

chambersiain
Posts:41
Joined:Sun Feb 06, 2022 4:58 pm

Re: Starting rate band

Postby chambersiain » Tue May 02, 2023 4:44 pm

Reference the savings allowance, do you get both the "starting rate"£5K and the "savers rate" £1K? That's a zero tax on £6K of savings interest

D&C
Posts:178
Joined:Mon Nov 25, 2019 11:35 pm

Re: Starting rate band

Postby D&C » Tue May 02, 2023 6:13 pm

Providing your non savings non dividend income is no more than your Personal Allwoance, either £11,310 (Marriage Allowance applicant) or £12,570, then yes, you can use both the savings starter rate band and nil rate band.

It's not that long ago that if you had the correct mix of income you could have annual income of £22,500 and pay no income tax. Say,

Pension/wages £11,500 (covered by Personal Allowance)
Interest £6,000 (all taxed at 0%)
Dividends £5,000 (all taxed at 0%)


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