ITV expert explained a rarely spoken about tax allowance that could allow certain savers to earn up to £18,570 in interest completely tax-free.
Taxes can be a daunting topic for many, but what if I told you that there is a little-known tax allowance that could potentially save you thousands of pounds? That’s right, an ITV expert recently revealed a tax allowance that could allow certain savers to earn up to £18,570 in interest completely tax-free. This is a game-changing discovery for those looking to maximize their savings and minimize their tax payments.
So, what exactly is this tax allowance and how can it benefit you? Let’s dive into the details.
The Personal Savings Allowance (PSA) was introduced in 2016 by the government to encourage people to save more and make it easier for them to do so. Under this allowance, basic rate taxpayers can earn up to £1,000 in interest on their savings without having to pay any tax. For higher rate taxpayers, the allowance is reduced to £500, and additional rate taxpayers do not qualify for this allowance.
However, what many people are not aware of is the Marriage Allowance, which can be combined with the PSA to potentially save you even more money. This allowance allows married couples or civil partners to transfer a portion of their personal allowance to their spouse, reducing their overall tax liability. This means that if one partner is a basic rate taxpayer and the other is a non-taxpayer, the non-taxpayer can transfer up to £1,250 of their personal allowance to their partner. This will then increase their partner’s PSA by £1,250, allowing them to earn up to £2,250 in interest tax-free.
But that’s not all. The Marriage Allowance can also be combined with the Personal Savings Allowance to potentially save you even more. Let’s take a look at an example to better understand this:
John and Sarah are a married couple. John is a higher rate taxpayer, earning £50,000 a year, while Sarah is a non-taxpayer. They have £20,000 in savings, earning 1.5% interest per year. Under normal circumstances, John would have to pay tax on the interest earned, reducing their overall savings. However, by utilizing the Marriage Allowance, Sarah can transfer £1,250 of her personal allowance to John, increasing his PSA to £1,750. This means that they can now earn up to £3,250 in interest completely tax-free, saving them a significant amount of money.
This is a great opportunity for couples to make the most out of their savings and potentially save thousands of pounds in taxes. But it’s not just limited to married couples. Civil partners and couples in a civil partnership can also take advantage of this allowance.
It’s important to note that the Marriage Allowance can only be claimed if both partners are born on or after 6 April 1935. Additionally, neither partner can be earning more than the personal allowance, which is currently set at £12,570. If you are eligible, you can apply for the Marriage Allowance through the government’s website or by contacting HM Revenue and Customs (HMRC).
The ITV expert also highlighted that many people are not taking advantage of this allowance, either because they are not aware of it or they think it is too complicated. But with the potential to save thousands of pounds in taxes, it’s definitely worth looking into.
It’s also worth mentioning that this allowance can be used in addition to other tax-free savings options such as Individual Savings Accounts (ISAs) and Premium Bonds. By combining all of these allowances, savers can potentially earn a significant amount of interest completely tax-free.
In conclusion, the Marriage Allowance is a rarely spoken about tax allowance that has the potential to save certain savers up to £18,570 in interest completely tax-free. It’s a great opportunity for couples to make the most out of their savings and minimize their tax payments. So, if you are eligible, make sure to take advantage of this allowance and potentially save yourself thousands of pounds. After all, every penny counts when it comes to savings.
