The 10% band is being scrapped soon, but worth using for now.
I am currently completing my tax return.
The order of tax precedence is as follows:
1. salary
2. interest
3. dividends
The income tax rates are:
savings: 10%/20%/40%
income: 10%/20%/40%
dividends: 10%/10%/40%
For the tax year ending in April (not the return I'm doing), the personal allowance is £5,225
The 10% band is £2,150
As long as your salary is less than £7,375 then, some of your interest will fall into the 10% band, but will be have taxed at source at 20%, meaning you get a refund of the interest paid.
If your salary is exactly £5,225, then you can earn gross interest of £2,150 and get a £215 tax refund on it (the highest possible). This is regardless of the amount of your divdiends, because these are taxed LAST.
£2,150 interest in a good account, say 6%, is earned on about £35k of savings.
So where everyone else gets 4.8% net, we get 5.4%. Not bad.
I am currently completing my tax return.
The order of tax precedence is as follows:
1. salary
2. interest
3. dividends
The income tax rates are:
savings: 10%/20%/40%
income: 10%/20%/40%
dividends: 10%/10%/40%
For the tax year ending in April (not the return I'm doing), the personal allowance is £5,225
The 10% band is £2,150
As long as your salary is less than £7,375 then, some of your interest will fall into the 10% band, but will be have taxed at source at 20%, meaning you get a refund of the interest paid.
If your salary is exactly £5,225, then you can earn gross interest of £2,150 and get a £215 tax refund on it (the highest possible). This is regardless of the amount of your divdiends, because these are taxed LAST.
£2,150 interest in a good account, say 6%, is earned on about £35k of savings.
So where everyone else gets 4.8% net, we get 5.4%. Not bad.
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