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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 15th Oct 15, 5:29 PM
    • 75Posts
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    MSE Helen Saxon
    Personal Savings Allowance guide
    • #1
    • 15th Oct 15, 5:29 PM
    Personal Savings Allowance guide 15th Oct 15 at 5:29 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 19
    • ColdIron
    • By ColdIron 7th Apr 17, 1:14 PM
    • 3,671 Posts
    • 4,418 Thanks
    ColdIron
    It would form part of your tax code, you need to check that in your Personal Tax Account
    Originally posted by Dazed and confused
    Given the statement below I was expecting a little more than a tax code, or am I expecting too much?

    HMRC give an estimated total of tax due on investments and savings, but you cannot drill down to see what they include. Then there are 3 questions "Do you have ...
    • Dazed and confused
    • By Dazed and confused 7th Apr 17, 1:18 PM
    • 1,963 Posts
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    Dazed and confused
    There's nothing more than that yet as as i know, my tax code isn't affected by my interest but it forms part of the breakdown given in the personal tax account.

    I doubt HMRC have got all the info from the banks yet for 2016:17 so too early for more info to show up yet i guess.

    The figures on my account were what i had supplied in the past and rolled forward each year.
    • ColdIron
    • By ColdIron 7th Apr 17, 1:27 PM
    • 3,671 Posts
    • 4,418 Thanks
    ColdIron
    I'd judge getting to the 3 questions bit to be a success

    "Do you have investment income that is incorrect?", "Do you have investment income that is missing?" and "Do you have investment income that has ended?"
    • Alan Rebeiro
    • By Alan Rebeiro 17th Apr 17, 2:13 PM
    • 1 Posts
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    Alan Rebeiro
    It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

    The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

    Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!
    • isasmurf
    • By isasmurf 17th Apr 17, 2:47 PM
    • 1,719 Posts
    • 739 Thanks
    isasmurf
    It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

    The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

    Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!
    Originally posted by Alan Rebeiro
    This is a known error in the online SA specification - see https://www.rossmartin.co.uk/sme-tax-news/2634-software-specification-error-affects-2016-17-self-assessment
    • polymaff
    • By polymaff 17th Apr 17, 2:51 PM
    • 1,806 Posts
    • 781 Thanks
    polymaff
    It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

    The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

    Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!
    Originally posted by Alan Rebeiro
    The £1,000 PSA is only available to individuals with at least £1,000 in taxable savings income, and with an adjusted total taxable income of less than £43,000. Is this si in your case?
    • Consumerist
    • By Consumerist 17th Apr 17, 2:51 PM
    • 4,689 Posts
    • 2,328 Thanks
    Consumerist
    . . . Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!
    Originally posted by Alan Rebeiro
    Well, I'm no expert but if you only earn £50 interest in a year then you'll only be entitled to tax relief on £50.

    The allowance gives tax relief on up to £1,000 interest pa if you're a BR taxpayer.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • grey gym sock
    • By grey gym sock 17th Apr 17, 2:57 PM
    • 4,131 Posts
    • 3,644 Thanks
    grey gym sock
    HMRC have indeed admitted that there are multiple errors in the online SA calculation. however, those errors don't quite seem to match the issue alan describes. it's been admitted that the £5,000 0% starting rate for interest is not applied properly, but i haven't seen any admission that the £1,000 (for basic-rate taxpayers) PSA for interest isn't applied correctly.

    to see what's going on, i would be interested in alan's total figures for
    (a) interest
    (b) dividends (if any)
    (c) all other taxable income
    and how much income tax the system says is due (... or, if you'd rather not disclose so much info, whatever you're happy to reveal).
    • polymaff
    • By polymaff 17th Apr 17, 3:01 PM
    • 1,806 Posts
    • 781 Thanks
    polymaff
    Those errors are to do with the starting rate for savings, not the PSA.
    • Dazed and confused
    • By Dazed and confused 17th Apr 17, 8:06 PM
    • 1,963 Posts
    • 884 Thanks
    Dazed and confused
    Alan Rebeiro

    Without some figures it's impossible to know what's gone wrong (if anything) but two things to clarify,

    Tax free interest, such as from an ISA doesn't need to be entered on a self assessment return

    All other interest is still taxable income, there is no "tax free" amount. There is a 0% rate band called, somewhat unfortunately, the Personal Savings Allowance which could be relevant to savings interest. This is not an allowance in the normal sense.
    • Doc N
    • By Doc N 18th Apr 17, 7:39 PM
    • 6,417 Posts
    • 19,309 Thanks
    Doc N
    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?

    Or is that pie in the sky?


    "If you go over your allowance

    Youíll pay tax on any interest over your allowance at your usual rate of Income Tax.

    If youíre employed or get a pension, HMRC will change your tax code so you pay the tax automatically.

    If you complete a Self Assessment tax return, report the extra interest there."




    "What you need to do

    You donít need to do anything to claim your Personal Savings Allowance.

    If youíre a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), youíll have to pay some tax on this. But you donít need to do anything yet.

    HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

    If you fill in a Self Assessment tax return you should carry on doing this as normal."
    • Consumerist
    • By Consumerist 18th Apr 17, 9:14 PM
    • 4,689 Posts
    • 2,328 Thanks
    Consumerist
    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? . . .
    Originally posted by Doc N
    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?
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • Dazed and confused
    • By Dazed and confused 18th Apr 17, 9:40 PM
    • 1,963 Posts
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    Dazed and confused
    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
    • By Consumerist 18th Apr 17, 10:31 PM
    • 4,689 Posts
    • 2,328 Thanks
    Consumerist
    . . . 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. . .
    Originally posted by Dazed and confused
    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
    Last edited by Consumerist; 18-04-2017 at 10:35 PM.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • isasmurf
    • By isasmurf 18th Apr 17, 10:56 PM
    • 1,719 Posts
    • 739 Thanks
    isasmurf
    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
    Originally posted by Consumerist
    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
    • By Dazed and confused 18th Apr 17, 11:53 PM
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    • 884 Thanks
    Dazed and confused
    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
    • By schiff 19th Apr 17, 10:27 AM
    • 17,750 Posts
    • 9,090 Thanks
    schiff

    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
    Originally posted by Dazed and confused
    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
    • By alduncan 29th Jun 17, 9:02 PM
    • 43 Posts
    • 14 Thanks
    alduncan
    Declare personal allowance interest on tax credits form?
    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
    • By Dazed and confused 29th Jun 17, 11:02 PM
    • 1,963 Posts
    • 884 Thanks
    Dazed and confused
    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
    • By schiff 14th Aug 17, 3:52 PM
    • 17,750 Posts
    • 9,090 Thanks
    schiff
    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: ĎAt Steps 2 and 3, deduct the reliefs
    and allowances in the way which will result in the greatest reduction in the taxpayerís
    liability to income taxí. 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."
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