Personal Savings Allowance guide

Consumerist · 18 April 2017 at 9:14PM

Doc_N wrote: »

Given the two current statements below from the HMRC website, is it safe to assume that no declaration of £1000+ interest needs to be made to HMRC by those of us not making SA returns? And that HMRC will sort it out on the basis of information they hold? . . .

Well, that's the way I read them.

What's not clear, however, is how they will justify their assessment - will they, for example, list the institutions which have paid you interest and how much or will they just state their overall assessment and leave you to find their mistakes?

Dazed_and_confused · 18 April 2017 at 9:40PM

Doc N

Whilst you are correct that nothing is required now one potential downside to waiting for the HMRC to get the info from all the banks is that although you end up paying the tax later thus potentially earning a bit of extra interest as you have funds in your account longer you will then be paying several years tax in one year.

For example later this summer HMRC get the details together for 2016:17 and send you a calculation for that year showing the tax due. At the same time they change your tax code to include an estimate of interest to be received for this year (2017:18). Due to the way PAYE works the new tax code will only apply from then on and wont be backdated to April so there will another 6 months of arrears there.

When the tax code for 2018:19 is sent out ready for April 2018 that will effectively be collecting tax due for 3 different years.

2016:17 - full years tax on savings
2017:18 - 6 months tax on savjngs
2018:19 - full years tax on savings

All the above assumes your salary/pension is big enough to cope with the debt, if not it would have to be paid direct (which some may prefer anyway).

Consumerist · 18 April 2017 at 10:31PM

Dazed_and_confused wrote: »

. . . Due to the way PAYE works the new tax code will only apply from then on and wont be backdated to April so there will another 6 months of arrears there. . .

I always thought that a new tax code issued during the tax year will automatically apply from the beginning of that tax year.

It should be applied by employers, through their tax tables, to repay tax owed by the end of the current tax year.

Edit
Unless applied on a "Month1" basis

isasmurf · 18 April 2017 at 10:56PM

Consumerist wrote: »

I always thought that a new tax code issued during the tax year will automatically apply from the beginning of that tax year.

It should be applied by employers, through their tax tables, to repay tax owed by the end of the current tax year.

Edit
Unless applied on a "Month1" basis

Agreed. Unless you are on a W1/M1 basis, PAYE is cumulative so changes to tax code in year will result in more or less tax being deducted in the month it is first applied to adjust your tax in the year to the amount you should have paid for that tax code to that point in the year.

Dazed_and_confused · 18 April 2017 at 11:53PM

That's what i meant, the code will be used from point of issue onwards but on an emergency/week 1/month 1 basis so any arrears from April to when the code is issued aren't deducted by the employer all in one go the first time the code is used.

The tax not collected will normally then be collected through the following years tax code.

schiff · 19 April 2017 at 10:27AM

Dazed_and_confused wrote: »

For example later this summer HMRC get the details together for 2016:17 and send you a calculation for that year showing the tax due. At the same time they change your tax code to include an estimate of interest to be received for this year (2017:18). Due to the way PAYE works the new tax code will only apply from then on and wont be backdated to April so there will another 6 months of arrears there.

When the tax code for 2018:19 is sent out ready for April 2018 that will effectively be collecting tax due for 3 different years.

2016:17 - full years tax on savings
2017:18 - 6 months tax on savings
2018:19 - full years tax on savings

This operation is small beer compared with persuading Google and Coca-Cola to pay more UK tax, but what a performance this is going to be, impacting on the individual as well as on HMRC!

People are going to have to monitor what's happening and where all the figures come from and if necessary asking an already hard-pressed department to explain and involve itself in comparatively small stuff.

TY George Osborne

alduncan · 29 June 2017 at 9:02PM

Hi there,

I'm a bit confused. Do I need to still declare the interest I've earned (above £300) on my tax credits claim form or not? It says not to declare anything in a tax-free account, like an ISA, but does now not any interest up to £1000 being tax free mean I don't declare it?

Many thanks,
Alastair

Dazed_and_confused · 29 June 2017 at 11:02PM

There is no tax free interest unless it's an ISA (or maybe the odd national savings product).

All interest other than that remains taxable it's just that some may now be taxed at a special rate (confusingly known as the Personal Savings Allowance) of 0%.

I cannot imagine tax credits have new rules just because of a new tax rate, albeit a weird 0% one

schiff · 14 August 2017 at 3:52PM

This is current advice to agents from HMRC. Apologies if the contents are already well known. If not, it could be useful:

"The technicalities

The PSA and DA allow a nil rate of tax. Dividends covered by DA still count towards
the Basic, Higher or Additional Rate bands where non-savings and savings income
take up some or all of Basic Rate and Higher Rate bands. This may therefore affect
the rate of tax paid on dividends received in excess of the £5,000 allowance. The PSA
also counts towards the Basic, Higher or Additional Rate bands but if the customer
has income chargeable at the Additional Rate, their PSA will be nil.
The legislation at section 25 (2) ITA 2007 states: ‘At Steps 2 and 3, deduct the reliefs
and allowances in the way which will result in the greatest reduction in the taxpayer’s
liability to income tax’. The fact that an allowance has been split to cover different
types of income (savings/dividends etc.) does not alter the order in which the income
is subject to tax per section 16 ITA.
The income in the SA tax calculation is allocated as follows and has not changed as a
result of the introduction of the Personal Savings Allowance:
1. non-savings income and non-savings income with notional tax
2. savings income (section 16 ITA 2007)
3. UK dividends, stock dividends and foreign dividends (section 16 ITA 2007)
4. lump sum payments and Settlor Interested Trust income (section 1012 ITA 2007)
5. gains on life policies with tax treated as paid (section 1012 ITA 2007)
Summary
Your feedback, the questions and observations from software developers, together
with our testing, have given assurance that the proposed changes to the calculator
will produce the most beneficial calculation for customers."

polymaff · 14 August 2017 at 5:24PM

schiff wrote: »

.. Your feedback, the questions and observations from software developers, together with our testing, have given assurance that the proposed changes to the calculator will produce the most beneficial calculation for customers."

Oh - ha, ha, ha.

Personal Savings Allowance guide

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