People earning under £19,000 can get a £5,000 boost(Image: (Image: ITVX))

Martin Lewis urges people earning under £19,000 to get extra £5,000

by · NottinghamshireLive

Martin Lewis, founder of Money Saving Expert, has called attention to a lesser-known tax benefit that could allow people earning less than £19,000 to gain up to £5,000 extra per year through tax-free savings. On The Martin Lewis Money Show Live, aired on ITVX and ITV1, Lewis explained a special tax measure known as the Starting Savings Allowance.

This particular allowance enables low-income individuals to earn more interest on their savings before paying tax compared with higher earners. In addition to the £1,000 Personal Savings Allowance available to anyone earning under £50,270, this can significantly increase the amount one can save without incurring tax.

Lewis elucidated: "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."

He added, "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."

However, Lewis noted, "If you earn above £12,570, for every £1 above that you go, you lose £1 from your starting savings allowance.", reports the Express.

Thus, an individual earning £2,500 over the threshold would see their Starting Savings Allowance reduced accordingly: "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."

Martin also mentioned that for those concerned about exceeding their Personal Allowance thresholds for the year, they could use a cash ISA, which is free from tax for the first £20,000 you put in each tax year.