income tax starter rate

until recently i hadnt been concerned about income tax for many years.

When my father died he left me everything--i bought my house outright and had a nice chunk in the bank. But interest rates collapsed and staid low for years...until..

My daughter in law is a financial planner and told me about income tax starter rate on pensioners savings interest. I had never heard of it--which goes for many people ive come across. i never really thought any more about it.

Now its caught up with me--interest at between 3 and 5% on savings.

Most people know the first £1000 interest is tax free for all except the higher earners---but did you know pensioners get whats called "starter rate" on the next £5000! of savings interest if they have no other income or pension except the state pension.---which is me.

I had my first tax demand a few months back--which clearly shows this--and i had done NOTHING to claim it. I paid it in full within the time frame.

edit--the starter rate is 0%

https://www.gov.uk/apply-tax-free-i...n tax-free accounts,of the following tax year.

Not just pensioners but anyone with income of less than 17,570. As go between basic rate tax allowance of 12,570 and the 17,570 point then the allowance reduces until it disappears.

In theory could have up to 18,570 in savings interest and not being subject to tax (assumes no pension income).

i thought that was the case but wasnt sure

Was curious about it and did a bit of research on it and has been around for quite some time. Budget 2014 was when it was introduced.

https://www.google.com/url?sa=i&sou...aw31QI7SFDjxRJrxrlOhlXWz&ust=1776304425240000

so is this 0% rate applicable to any earnings over the £12570 threshold too ? (up to £5000 income ?)--for anyone ?

No. Will only cover savings income from 12570 to 17570. Any other income in that range is taxed and loss the benefit of no tax on savings.

Eg assume income of 15570 then first 12570 is free of tax, get taxed on the next 3000 on income but could then have 2000 of savings income tax free and then the 1000 of normal tax free interest savings . That is at least my understanding of it.

When state pension goes above the 12570 level then will start to eat into the extra 5000 available.