Underpayment letter from HMRC - How do they estimate savings interest due?

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  • vacheron
    vacheron Posts: 1,604 Forumite
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    Mikeyorks wrote: »
    The Coding notice was correct when issued. As £5435 was the basic PA at the start of the year. Gordon Brown added £600 to it in the Sept as part compensation for the furore surrounding the abolition of the 10% tax rate. So your P60 should show Code 603 whereas the P2 will correctly show 543.

    Hi Mikeyorks. Thanks for clarifying that for me. I have amended my calculations to use the "post Gordon" allowance.
    Mikeyorks wrote: »
    So does it distil to the fact that the underpayments are because the wrong Code was used? Despite that appears to be countered by the fact the interest coded out on the P2 (only) you received - is much less than that used on the P800s?

    Sadly, (for them not me :)) ... no.

    Their interest estimates are still way out and the calculations do not take into account my higher rate tax relief on my stakeholder pension contributions which I had not previously claimed, nor my charitable giving relief.

    Based on the calculations I have now completed using educated estimates of interest until the full figures arrive it looks like their claim of a £900 tax underpayment will in effect result in something in the region of a £1100 overpayment for the four tax years 2008-2011 inclusive. :)
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • zygurat789
    zygurat789 Posts: 4,263 Forumite
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    You should always keep track of your savings accounts, there is always another account paying a better rate of interest. You worked hard for this money, don't ignore it now. There are other forums on this subject - have a look.
    The only thing that is constant is change.
  • vacheron
    vacheron Posts: 1,604 Forumite
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    zygurat789 wrote: »
    You should always keep track of your savings accounts, there is always another account paying a better rate of interest. You worked hard for this money, don't ignore it now. There are other forums on this subject - have a look.

    Definately good advice but I've always kept on top of the best savings rate having always been a bit of a rate tart. (Partly the reason I wasn't looking forward to sorting out these tax issues was thinking how many institutions and different accounts I would have to collect the interest statement data from before I could do so).

    As much of my savings are now fully offsetting my mortgage rate at 3.49% I don't have to work as hard as I used to.

    What is most frustrating is looking back through my savings accounts from 2008 which have names like "7.9% Fixed 1 Year Saver"..... Bring back the good old days! :)

    Now, thanks to this forum, and also to the nice people at HMRC for sending me a tax demand large enough to give me the kick in the backside I needed to get this all sorted out, I am now far more Income Tax savvy too.

    After all, it's silly to spend time chasing an extra 0.1% ISA return while leaving a 20% pension tax relief unclaimed! :o
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • vacheron
    vacheron Posts: 1,604 Forumite
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    edited 2 May 2012 at 12:08PM
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    Hi All.

    Just a quick thread resurrection to provide an update for those who all who posted or followed the thread or who may search the forums for a similar problem in the future.

    I sent my caluclations to HMRC on the 3rd of April providing evidence of my tax situation rather than their uninformed guesstimate.

    On Friday the 27th of April I recieved a new notice of coding which reverted my 2012-13 tax code back to 810L, signifying that they no longer believed that I owed any historically underpaid tax.

    Then on the 1st of May I recieved a further letter from HMRC admitting that:
    • They had inaccurately estimated my savings interest.
    • They had failed to pass on coding changes to my employer between 2007 and 2011.
    • They had not taken into account the tax relief on my pension contribution rebate contained in my 2005 return to reduce my tax calculation estimate, but had chosen to use the interest figures given in the same return to increase it!
    Along with this letter was a set of revised P800 calculations. Their original claim that I owed them £949 had now changed to me being entitled to a £980.00 refund!

    So, in summary:..... :j
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
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