Could do with some advice please - becoming a taxpayer again

Nick_C

Suggest you keep your interest paid gross for the current tax year, fill in a self assessment form asap after the new tax year starts and let HMRC work out any under/overpayment for this year. Notify banks / building societies that you need interest paid net from 2014/15.

You obviously have a substantial sum in savings account. I would suggest you consider moving some of it into shares. There are plenty of blue chips paying around 5% net.

zygurat789

Bogof_Babe wrote: »

Just clicking Thanks doesn't seem adequate after all that help jimmo, so thought I'd say it as well!

I decided overnight to do some proper calculations as to how much interest I can continue to have tax free up to the end of the year, or conversely how much I'll owe them. Shouldn't be too difficult as I have it all on a spreadsheet, just not grouped into a single table. Job for this afternoon.

Thought I might inform the society that pays me the biggest amount each month (£277) and leave the others. The next biggest (£168) matures in May anyway so I might not need to mess around with it. The others are only about £120 in total so might just scrape under the wire until the new tax year starts. (I know that doesn't add up to £7K but a couple matured during the year and haven't been reinvested.)

Anyway I'll get there in the end, and I'm so grateful for everyone's input. :T

If you retain any gross interest payments you will land yourself with a tax return to complete, lots of people call this self assessment. If you are paying tax your are not allowed to sign the form for deposit holders to pay you gross.
On an ongoing basis your pensions are £12,750 and interest of £7,000 gives you an income of c£20k which means yiou will not be eligible for the 10% savings rate band, all yur taxed income will be taxed at 20% and should be achieved by reducing your PA by your pension and by suffering a 20% deduction on your savings interest. Both of these happen without you having to do anything.

Oh, I forgot to add, Welcome to this board.

xylophone

http://www.hmrc.gov.uk/taxon/worked-examples.htm

If you wish to check on the 10% rate.

jennifernil

On the figures you have given for the current TY 13/14, you will only exceed your personal allowance by a small amount, and you have already had some tax deducted from your pension which will not be automatically refunded due to getting a Month 1 code, so I would not rush to de-register from gross interest.

For next TY 14/15, you will need to de-register all your accounts.

Getting some gross and some nett is not allowed, but would not apply in your situation anyway as your pensions total more than your personal allowance.

Bogof_Babe

Yet again thanks everyone, and for the welcome - I haven't really bothered with this board before as it wasn't relevant to me, but I can see what a helpful lot hang out here!

I am keen to avoid any chance of having to complete self-assessment (my dad used to dread it every year), and having been told by the chap at HMRC that there was no need, I'd like to keep it like that, so if I have to immediately change to net interest payments then so be it. On the amounts remaining and the short period of tax year remaining it isn't going to be huge, and I can always reclaim overpayments if need be.

I have a fairly substantial amount in bonds as both my parents are now deceased, and left my sister and I a reasonable inheritance - not life-changing but enough to be a decent nest-egg. I don't really want to take any gambles with it, as I didn't earn it and feel I should keep it safe for the next generation. Don't have kids ourselves but have a nephew and niece, who rightfully should eventually benefit from their grandparents' providence.

My husband was persuaded to put a fair bit of money (his own inheritance) into a shares-based investment package, and luckily it has performed quite well, as he took it out in 2009 when the market was pretty low compared to now. He takes a 5% income from it every month, and the value of his portfolio is still healthy thank goodness. However I don't really want to put any more into shares just now, especially as the market is pretty high. I would be hopeless picking individual shares so it would have to be a managed fund. Maybe in the future I'll consider it, but for now I'm happier with fixed returns, even if they aren't up to much.

Must start on my next lot of calculations.....

jennifernil

I would not worry about it, as jimmo said it's better to owe HMRC than to have to wait for a refund! Anyway it looks like you would still be due a small refund for the current TY.

Having to do a return is no big deal. With your simple affairs it would only take a few minutes anyway. And once they see that everything that needs to be taxed is being taxed, they would most likely say you no longer need to do one.

jimmo

I can’t remember ever seeing Jennifernil get a calculation wrong so it might be me.
I think your 2013/14 total income will be
Occ Pension 1426
State pension 1238
Interest 7000
Total £9664
As the total exceeds £9440 you will be liable to tax, but only at the 10% rate on savings income. So the tax payable will be £22.40.
In principle you should now cancel your registration with every interest payer and if you do so you will suffer 20% deductions on any future interest credited.
As I understand it interest payers can only deduct tax from future credits, they cannot retrospectively deduct interest from previous credits.
Therefore , as one payer pays you £277 per month you will suffer more tax on that than your total liability for the year.
For the time being at least we can set aside your pension income. Once your occ pension payer applies the correct code you will get the tax back in your next payment.
If you delay cancelling your registration until April that will be a little bit naughty but HMRC aren’t going to lock you up and throw away the key for the sake of £22.40.
Now, if you correctly cancel all registrations now you will end up with a mix of some taxed, and some untaxed, interest as well as your 2 pensions. That will make things rather more complicated than if all your interest is untaxed.
Either way you won’t fit the criteria for needing to complete a Self Assessment so that shouldn’t be a worry.
http://www.hmrc.gov.uk/sa/need-tax-return.htm?WT.ac=SA_ DYNTR
However you will need to let HMRC have your final figures when you know them.
In HMRC terms an end of year underpayment of £22.40 simply isn’t worth chasing and if that proves to be accurate you will be extremely unlucky indeed if they ask you to pay up at all.
For PAYE cases they operate an assessing tolerance. Some on here have said its £50 but I couldn’t possibly comment.
The only potential spanner in the works seems to be your State Pension where you are assessable on the amount you are entitled to as opposed to the amount you receive.
If, like me, you are paid every 4 weeks in arrears and your April payday is say the 13th, they will be paying you 3 weeks of your entitlement for 2013/14 and one week of your entitlement for 2014/15. Therefore your estimate of your State Pension used in the computation above could be 3 weeks out.
A pretty reliable clue will be in your new 2013/14 coding that HMRC are hopefully sending to you because if that is based on the Uprating Service that is the figure they will use.
So sorry for the length of this post but the commencement of State Pension is, for many, many people, their first real involvement with the taxman. There are lots of things to come to terms with in a short space of time and it really is best if you can “hit the ground running”

jennifernil

The situation with code numbers for 13/14 is a bit confusing, but I thought the OP said it was a M1 code, which I thought meant each month stood alone and previous overpaid tax (the 20% on a back-payment) would not be refunded?

So the OP has already had more tax deducted than they should pay for 13/14 ?

Or have I totally misunderstood that?

The assessable as opposed to received state pension stuff is a mystery to me jimmo! Thank goodness we get ours weekly, in advance.

jimmo

Yes but she has already spoken to HMRC. Whilst she hasn’t actually said so I assume that HMRC will now be issuing a cumulative coding for 2013/14 with nil previous pay and tax and a deduction for State Pension.
If so, all PAYE deductions made so far will be refunded via PAYE before the year end.

Bogof_Babe

Wow, still the advice and information comes in - how many times can I say "thanks"? :T (Feels a bit juvenile putting smileys on the Tax board as it's all very serious stuff, but it's just a habit and I'll try to break it!)

I opted for weekly payment of my SRP so have calculated it up to the final payment of the year on 3rd April.

I laboriously added up every penny of interest I've had this year, and what I expect to get before 5th April. I also calculated my received and anticipated occ pension payments and SRP.

The result was that my total income for 13-14 will be £11,910 - this assumes I stay with gross interest and no further tax deducted from occ pension. Thus I'd owe tax on £2470. (Not sure where the £165 tax already taken from my occ pension fits in.)

If I'm understanding correctly, the tax would be due at 10% (still getting my head around this), so £247.

If I immediately change all my bond interest to net, this reduces my bond income by £258, so just about break even overall.

How quickly can banks and building societies make the change do you think? Probably won't be able to get hold of anyone until Monday now. Most of them pay into my current account on 1st of the month, but the £277 one pays in on 17th, so there's a full month until the next one is due.

If my occ pension provider receives notification of my tax code quickly, and starts making deductions, I'll then be out of pocket overall. So still deciding what to do. Actually I'm away next week until Friday, so unlikely to be able to make progress until then, as I don't want to cart all my bonds paperwork around on trains.

Please don't apologise for lengthy replies - it's a veritable minefield isn't it?

It's a good thing there are helpful people like the posters on here, as trying to get through to HMRC is such a nightmare it'll be a last resort in future!