# UK Personal Savings Allowance



## the_mighty_tim (Jan 10, 2014)

So, from April, this becomes a thing:

https://www.gov.uk/government/publi...llowance-factsheet/personal-savings-allowance

Which is good, because I won't get taxed on my savings (at least from the UK). But I guess this means that as far as the IRS is concerned, my passive income will remain the same, but the UK tax paid on it will be nothing (or next to nothing) and thus I could end up paying the US tax on my savings instead of the UK?


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## BBCWatcher (Dec 28, 2012)

Possible, yes, but not that common.

It looks like the U.K. has constructed this tax break quite badly just purely as a U.K. domestic tax matter. Let's suppose you have £1,000 in interest income and you are just at the top of the 20% tax bracket (i.e. have £43,000 in adjusted net income). Then you pay zero U.K. tax on your interest income. Increase your adjusted net income by £1 and now £500 of your interest income is taxable, i.e. you pay £100 in tax for that £1 of additional income? That's what it looks like: a 10000% marginal tax rate on that extra pound.

If that is what happens at the bracket transitions, and if this design problem bites you, the U.S. tax code could help because it'll bump up your Foreign Tax Credit in response.


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