Tax on savings after house sale

I sold my house last year and have £75k in a 3% savings account. As I’m employed on £32,000 a year am I only entitled to £500 in interest before I pay tax on my savings? Im unsure whether my wages pushes my savings into the higher tax category? Can anyone help please?? Many thanks

Hi  I am not sure I understand the problem. If your salary is £32,000 you are well within the basic rate band. £75,000@3% would yield £2,250 savings interest a year, meaning you are still well below the higher-rate threshold, so the personal savings allowance is still £1,000. It looks to me that your numbers give taxable income of £34,250, less £12,570 personal allowance and £1,000 personal savings allowance leaving £20,680 to be taxed at 20%, or am I missing something?

Many thanks for your reply. I’d been told that my savings are seen as ‘income’ so both my salary and savings would be pooled, putting me in the higher tax band >50k. It looks like this is not the case though? And it’s only the interest from the savings that’s ‘income’.. is that correct? Really appreciate your help, thank you.

Yes, it is the income from the savings that is taxable. One can of course save up to £20,000 per year in an Individual Savings Account (ISA), where the interest is tax exempt. As you have more than £1,000 interest that is something you may care to research. Most banks and building societies etc have such products on their websites.

Many thanks indeed for your help.

Hi,

A basic rate tax payer, can earn up to £1000.00 in interest before the balance becomes taxable. For higher rate taxpayers, the limit is reduced to £500.00.  

The guidance at advises that the basic rate income level if £50270.00.

Income Tax rates and Personal Allowances 

Please not that this figure is different in Scotland and Wales.

Thank you.
 

Many thanks indeed for your help

Hi Gary Coombs,

Based on your question, the liability is calculated in this way.

Income £32000 - £12570 = £19430 @20%.

Untaxed interest £2250 - £1000 = £1250 * 20%.

There is a tool to allow you to estimate your income tax here:

Estimate your Income Tax for a previous tax year

Thank you. 
 

HMRC Admin 25, Thanks. I was actually only trying to point the OP in the right direction but the tool you link to looks interesting. However, I popped the £32,000 and £2,250 (mentioned above) into the earnings and bank interest boxes in the tool and it appears not to give access to the Personal Savings Allowance, thus giving the wrong result. The total taxable income, after personal allowance is showing at £21,680, not, £19,430 + £1,250 = £20,680 as per your figures above. You might want to ask the product owner to check what the calculator can and cannot do...

Hi,

It is only the interest that counts as income, you do not include the capital.

Thank you.