Martin Lewis alert on 'little-known' savings rate tax that goes above £1,000 cap

Martin Lewis warned savers who may be missing out on tax-free savings

Adding further detail, he said, "No, it's not the 'you can earn £1,000 a year', there's another one too," referring to the fact that Brits are allowed to earn a £1,000 interest on their savings each year without having to pay any tax on it. Moreover, Martin explained that he was not talking about personal savings allowance, which currently stands at £12,570 and allows every Briton to earn up to this amount every tax year without being subject to income tax.

Instead, he elaborated, "This is for anyone who has relatively low earned income and high interest, effectively you may be able to get up to £18,570 without paying tax on it,".

When Angus from Derby, a fan of the show who had recently retired before reaching the state pension age, called in to share his financial dilemma about whether to touch his savings or private pension until his state pension commences, Martin pointed out that he is in what could be considered a "sweet spot" to fully take advantage of this rate.

Angus conceded that he had "never heard of" this particular tax allowance before deciding how best to manage his finances until his state pension starts. His current financial position means he's on a modest income, which qualifies him for the starting rate for savings as long as his total income from savings stays below the £18,570 threshold.

The starting rate for savings is specifically designed for individuals with a lower income, who earn under £18,570 annually from their combined earnings and savings. On the BBC podcast, tax expert Rebecca Benneyworth clarified: "The first £5,000 worth of savings income is subject to the starting rate which is a lovely round number...of zero."

In an effort to keep things straightforward, the tax specialist pointed out that it's possible to stack these tax breaks together. Although Martin Lewis was initially taking a step back to let his panel of experts take the reins, he couldn't help but interject to encapsulate the point: "In the right circumstance, you can earn up to £18,570 if you have the right combination of savings, interest and earnings."