Martin Lewis urges people earning under £18,000 to get extra £5,000 | Personal Finance | Finance
Money Saving Expert founder Martin Lewis is urging people who earn under £19,000 to get up to £5,000 per year extra from tax-free savings.
Speaking on his The Martin Lewis Money Show Live on ITVX and ITV1, Martin let people know about a little-known tax quirk called the Starting Savings Allowance.
This is a tax freebie for people on low incomes which allows people to earn more interest on savings before they pay tax on it than most workers.
Martin said that this, combined with the £1,000 Personal Savings Allowance which is available to everyone earning less than £50,270, can boost the amount you can save without being taxed on it, even if you’re working.
He explained: “Everybody is allowed to earn, or most people are allowed to earn, up to £12,570 a year without paying tax on any income, whether it’s from earnings or savings interest or whatever, so that’s your first amount.
“If you earn from earnt income less than that, as well as your £1,000 Personal Savings Allowance, there is a £5,000 starting savings allowance, which means you can earn £5,000 of savings interest on top, tax-free.
“If you earn above £12,570, for every £1 above that you go, you lose £1 from your starting savings allowance.
“So let’s say you earned £2,500 above the £12,570 from earned income coming in, then your starting savings allowance would lose £2,500 so it would then be worth, £2,500.
“So you can earn £2,500 on starting savings tax-free and £1,000 from your Personal Savings Allowance, so an extra £3,500 of savings tax-free.
“Really complicated to explain, in a nutshell if you earn less than about £18,000 you may be able to earn more interest tax-free than anybody else.
“As simple as that.”
Of course, Martin added that for those who are worried about going over their Personal Allowance thresholds for the year, you can use a cash ISA, which is free from tax for the first £20,000 you put in each tax year.
