Self assessment/hmrc

FOREVER21

Hi anyone able to help please.After being taxed under PAYE for my working life ,HMRC have now told me that I need to go onto self assessment, in retirement.

Two immediate questions, Can I appeal against going on self assessment and stay on PAYE?

If I have to go onto self assessment do I still get a tax code at the start of the tax year, if not how does my works pension deduct tax.
Probably silly questions to those in the know but like I said I have only been used to PAYE.

I have tried the relevant HMRC web pages but can not find the answers.

CLAPTON

why have HMRC said you should self assess?
a few more facts would help us help you

but your pension will indeed have a taxcode code applied in the normal way and tax will be deducted at source.

PlutoinCapricorn

HMRC want to be sure that you are paying the right amount of tax. The personal allowance that people get when they reach 65 depends on how much their income is. Retired people may have pensions coming in from various sources and they may still be doing odd bits of work.

CLAPTON

PlutoinCapricorn wrote: »

HMRC want to be sure that you are paying the right amount of tax. The personal allowance that people get when they reach 65 depends on how much their income is. Retired people may have pensions coming in from various sources and they may still be doing odd bits of work.

Maybe so, but that doesn't mean a full self assessment form; typically a phone call or letter will suffice for the majority of retired people

ChiefGrasscutter

...snag is some many people will have so little idea what they are doing that they will say anything to a letter or phone call.

Forcing them to fill in a SA form (if only for 1 year) in a formal manner will "concentrate their minds" on getting it right and maybe the taxman will find that more tax is indeed payable - which is why they are doing this.

FOREVER21

CLAPTON wrote: »

why have HMRC said you should self assess?
a few more facts would help us help you

but your pension will indeed have a taxcode code applied in the normal way and tax will be deducted at source.

State pension,5K works pension3K, building society interest around 3K gross taking it just over my 10500 allowance, no further income.

Revenue say that I have to go on self assessment as I have interest more than £2500

Dazed_and_confused

FOREVER21 wrote: »

State pension,5K works pension3K, building society interest around 3K gross taking it just over my 10500 allowance, no further income.

Revenue say that I have to go on self assessment as I have interest more than £2500

Do you pay tax on your building society interest and if not is this because it is an account where no tax can be deducted or because you have completed an R85 and opted not to pay tax?

Ainsley1

I suspect this will have something to do with the tax rate on taxable savings income. This varies, as I understand, with the amount of savings income, from a starting rate of 10% to 20% or higher. To enable the revenue to calculate how much tax you owe it needs to know that income level and what tax has already been deducted. It will not necessarily be that the correct tax has already been deducted by the bank. See http://www.hmrc.gov.uk/taxon/bank.htm.

Are you also confused that Self Assessment means PAYE will not apply? Once the revenue knows you total income for the previous tax year it can then estimate your expected income for the year ahead and set your tax code accordingly so what you will owe the taxman is virtually all deducted via PAYE - as long as your circumstances do not change you will likely not have much of a discrepancy at the end of the tax year. Note that if your tax code has been set incorrectly for this year (assuming it's your first SA tax year) then you may well have an adjustment to make at the end of the year.

It also strikes me that £3.5K means a very significant amount of capital to produce the savings. You may need to ensure that it is split correctly to get protection but also that you may be able to avoid tax progressively by saving into an ISA.

CLAPTON

reasons for HMRC requiring a self assessment

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

You have income from savings, investment or property

If you are an employee or a pensioner and already pay tax through a PAYE code, you can sometimes ask for tax that you owe on income, such as savings and property, to be collected through your code number. You'll need to complete a tax return instead if the income you receive is:

• £10,000 or more from taxed savings and investments
• £2,500 or more from untaxed savings and investments
• £10,000 or more from property (before deducting allowable expenses)
• £2,500 or more from property (after deducting allowable expenses)

so it would appear the the OP has untaxed savings income of more than 2,500

jimmo

Self Assessment and PAYE are 2 separate systems. Regardless of whether you are in Self Assessment or not, your works pension provider will still have to operate PAYE and, in theory at least, will deduct the correct amounts of tax from your pension.

As a separate matter you seem to fall foul of the HMRC rules and are required to complete annual Tax Returns because you breach the £2,500 limit on investment income.

That may well be a bit of a chore but its not really going to change anything in terms of tax deductions from your pension.

zygurat789

jimmo wrote: »

Self Assessment and PAYE are 2 separate systems. Regardless of whether you are in Self Assessment or not, your works pension provider will still have to operate PAYE and, in theory at least, will deduct the correct amounts of tax from your pension.

As a separate matter you seem to fall foul of the HMRC rules and are required to complete annual Tax Returns because you breach the £2,500 limit on investment income.

That may well be a bit of a chore but its not really going to change anything in terms of tax deductions from your pension.

The PAYE system may have been able to cope with all eventualities when it was first implemented, I wasn't a taxpayer at the time, however, it is unable to cope with either age allowance clawback or tax at the 10% rate on interest because significant factors in the calculation of both are not available until after the end of the tax year.
It is, therefore, not possible to deduct the correct amount of for the current year's tax through PAYE during the tax year.
The OP does not mention if any tax has been deducted, give the figures
the calculated tax bill is £50 so there may be a refund in the offing, could be worthwhile jumping through their hoops!!