Tax advice please

Any

overtyping error - FIL - father in law:-)

I was reacting to Trevormax's sentence "He does NOT need to become self assessed as he does not have more than £2000 of untaxed income"

So I understand that Trevormax is saying that would he have more then £2k of untaxed income then he would have to self assess...

Steve_xx

Any wrote: »

overtyping error - FIL - father in law:-)

I was reacting to Trevormax's sentence "He does NOT need to become self assessed as he does not have more than £2000 of untaxed income"

So I understand that Trevormax is saying that would he have more then £2k of untaxed income then he would have to self assess...

Ah, ok I understand.

It seems that you would have to complete a tax return in these instances (taken from HMRC site):

Employees and pensioners with complex tax affairs
You need to fill in a tax return if you:
· have an annual income of £100,000 or more
· have annual income from savings or investments of £10,000 or more (before tax)
· claim against tax for expenses or professional subscriptions of £2,500 or more
· have untaxed income of £2,500 or more (although some pensioners may be able to pay the tax on this through their PAYE tax code)
· owe tax at the end of the year that cannot be collected through a change to your PAYE tax code for the following year
If you are 65 or over, HM Revenue & Customs may ask you to fill in a tax return so that they can work out how much higher personal allowance or Married Couple's Allowance you should get.

Here is a link to that information:

http://www.hmrc.gov.uk/sa/need-tax-return.htm

Any

I see you will be tax specialist by the time you are finished with your uncle:-))

By the way, doesn't your uncle have interest income of about £10k after 20% tax?? Or did I misunderstand your first post?

Steve_xx

Any wrote: »

I see you will be tax specialist by the time you are finished with your uncle:-))

By the way, doesn't your uncle have interest income of about £10k after 20% tax?? Or did I misunderstand your first post?

I think I will be a tax specialist by the time I've done with this. The tax regime is so complex and one wonders how it has evolved into the nightmare that it is?

Yes his total interest is in excess of 10k before it is taxed @ 20%, and yes, reading the advice on the HMRC website he should be doing an assessment. This coming year, due to interest rates being so low, he will earn much less, but he will still have a total in excess of £10k I would think.

However, as his affairs are relatively simple I guess it means that they wont be too bothered since it seems that they owe him some money rather than it being the other way around. I heard once that if you overpay then it's not necessarily a bad thing because they add interest to any rebate they give you, and that such interest is tax-free. I don't know if this would be the case in this instance, or what the interest rate would be if it's still paid.

Mikeyorks

Steve_xx wrote: »

This seems to suggest to me that as his pension earnings are in excess of the £2320 10% starting rate, that he will not be entitled to reduce the tax already paid on his savings by 10%?

As has been correctly pointed out - the 10% Savings rate sits on top of the PA. So if any part of his gross interest hits the band formed by PA + 10% rate (i.e £6035 + 2320 = £8355) then he is entitled to only pay 10% on that element of the interest.

As his earned income (£5300) is less than the PA ..... then there's an easy 'back of the fag packet' calculation :

Residue of personal allowance (£6035 - £5300) = £735 @ 20% = £147
Savings interest band wholly utilised at 10% = £2320 @ 10% = £232
Overpaid and refundable = £379

Again - correctly - it's an R40 to reclaim. SA is both inappropriate and unnecessary

Mikeyorks

Steve_xx wrote: »

I heard once that if you overpay then it's not necessarily a bad thing because they add interest to any rebate they give you, and that such interest is tax-free.

It is tax free ... and called repayment supplement. But it's only added for repayments after 31st Jan following the year of claim ............. and it's currently at 0% since 27th Jan :
http://www.hmrc.gov.uk/rates/interest-repayments.htm#itnic

...... so don't use HMRC as a Bank!

Steve_xx

Mikeyorks wrote: »

As has been correctly pointed out - the 10% Savings rate sits on top of the PA. So if any part of his gross interest hits the band formed by PA + 10% rate (i.e £6035 + 2320 = £8355) then he is entitled to only pay 10% on that element of the interest.

As his earned income (£5300) is less than the PA ..... then there's an easy 'back of the fag packet' calculation :

Residue of personal allowance (£6035 - £5300) = £735 @ 20% = £147
Savings interest band wholly utilised at 10% = £2320 @ 10% = £232
Overpaid and refundable = £379

Again - correctly - it's an R40 to reclaim. SA is both inappropriate and unnecessary

Thanks for the information.

Just have a look at the two examples here from HMRC. I can get my head around the first, example 23. But the second, example 24, seems to contradict it inasmuch as no 10% rate is applicable to this guy. I can't grasp why the guy wouldn't also have some of his savings taxed at 10% rather than 20%:

http://www.hmrc.gov.uk/tdsi/example23.htm
http://www.hmrc.gov.uk/tdsi/example24.htm

Mikeyorks

Steve_xx wrote: »

But the second, example 24, seems to contradict it inasmuch as no 10% rate is applicable to this guy. I can't grasp why the guy wouldn't also have some of his savings taxed at 10% rather than 20%:

The clue is in what I posted above :

So if any part of his gross interest hits the band formed by PA + 10% rate (i.e £6035 + 2320 = £8355) then he is entitled to only pay 10% on that element of the interest.

..... if someone's earned income (as is the case in your Example 24) exceeds the band formed by (PA + £2320) ........... then the 10% band does not exist for them. It purely exists where your Savings interest hits PA + £2320.

I've described it in the past as a 'pseudo band' ...... because it doesn't actually exist for most people. Which is quite contrary to the 10% tax band (which was removed, but which also facilitated people such as your relative reclaiming some interest at 10%). Because if you exceeded your PA - you always progressed up the tax scale via that 10% tax band.

But you do not touch the 10% savings band ..... unless your interest hits the PA + £2320 gap. Trust that's helpful? It's actually straightforward once you get your head around it.

But deep in the Treasury annals I found something, last year, that described this as 'simplification'! Which it clearly isn't ....... either for HMRC or their customers.

jem16

Steve_xx wrote: »

But the second, example 24, seems to contradict it inasmuch as no 10% rate is applicable to this guy. I can't grasp why the guy wouldn't also have some of his savings taxed at 10% rather than 20%:

Because Deryn (she not he) earns £20,000 which is way above the personal allowance of £6035.

The 10% band only applies if you have earned income less than your personal allowance or the personal allowance plus the 10% band.

shelleyelm

I was wandering if anyone has any advice for me? 3 times the tax office attempted to take payments from my husbands account even though he did not owe them any money he informed them each time of the mistake. The problem being that his bank closed his account because of the actions of the hmrc and he now has bad credit rating can we claim compensation and how much are we likely to receive?