Tax Free Savings Guide

eskbanker

Mee said:

eskbanker said:

Mee said:

I've read How the starting rate for savings works - Money Saving Expert page, but I'm still confused as to the £5,000 starting rate for savings affects me.
 I earn on average (on a zero hours contract) around 6K at most, but HMRC have reduced my tax code due to supposedly earning around 3K interest (which I need to check) to 923 L tax code.  So far this tax year I've worked and earned more than most years and I'm likely to breach the new personal allowance of 9K, but I don't understand how this works with £5,000 starting rate for savings as it seems HMRC seem to think I need to pay tax on less than £5K.

It'll all come out in the wash but if you're concerned about temporarily paying unnecessary tax then update HMRC about your anticipated non-savings income, which can be done online via your personal tax account.

Thanks. I can't see online how I can do this as a PAYE or what BBSI data they are working on, but hope they will send a list when I get through by 'phone.

Chances are that the interest data they'll be working from will still be estimates based on 2023/24, although 2024/25 ought to be updated soon.

If your earned income is less than £12,570 then you won't be liable for tax on it, and on top of that you can earn at least £6K more in savings interest income because of the allowances explained in that MSE article.

Dazed_and_C0nfused

Mee said:

I've read How the starting rate for savings works - Money Saving Expert page, but I'm still confused as to the £5,000 starting rate for savings affects me.
 I earn on average (on a zero hours contract) around 6K at most, but HMRC have reduced my tax code due to supposedly earning around 3K interest (which I need to check) to 923 L tax code.  So far this tax year I've worked and earned more than most years and I'm likely to breach the new personal allowance of 9K, but I don't understand how this works with £5,000 starting rate for savings as it seems HMRC seem to think I need to pay tax on less than £5K.

Your tax code allowances (not your Personal Allowance) have been reduced as based on their estimate HMRC think you have spare tax code allowances that the interest will use up.

If you know you will earn more than expected then just update your estimated earnings/pay on your Personal Tax Account and your tax code will be automatically reviewed and updated.

In simple terms the estimated pay is what you expect to see on your P60 next April.

If you estimate it will be £12,570 then you will have no spare allowances and, based on what you have posted, your tax code will change to 1257L.

Your interest of ~£3k would all then be taxed, but at a 0% tax rate (the savings starter rate).

BreakingGlass

It's a bit of an aside for this thread, but out of curiosity a couple of weeks ago I called HMRC and requested a statement of Bank and Building Society Interest (BBSI) for the 23/24 tax year, in order to check against my records.  The BBSI arrived today.

HMRC's letter states that my untaxed interest total for the year is just over £12k, made up of 36 listed accounts (all 'Actual - BBSI Pre-Pop' - hence details have been supplied by the Bank or Building Society).  Ten of the listed accounts had zero interest.

My self-calculated total for the same year is untaxed interest of just over £17.5k, hence HMRC have recorded approx £5k less taxable interest.  I had no multi-year or fixed term accounts to confuse the issue.  

I have tried to reconcile their breakdown and they appear to have missed just under £5k from one bank, and about £300 from another.  Both banks are fairly mainstream and popular with MSE savers.

I had declared the £17.5k figure in my tax return for 23/24.  I had Personal Allowance, Starting Rate for Savings and Personal Savings Allowance available to set against the untaxed interest so there was nothing to pay either way.  It is however interesting that either two banks have failed to report, or HMRC were unable to match the reported interest to my personal tax account.

Dazed_and_C0nfused

BreakingGlass said:

It's a bit of an aside for this thread, but out of curiosity a couple of weeks ago I called HMRC and requested a statement of Bank and Building Society Interest (BBSI) for the 23/24 tax year, in order to check against my records.  The BBSI arrived today.

HMRC's letter states that my untaxed interest total for the year is just over £12k, made up of 36 listed accounts (all 'Actual - BBSI Pre-Pop' - hence details have been supplied by the Bank or Building Society).  Ten of the listed accounts had zero interest.

My self-calculated total for the same year is untaxed interest of just over £17.5k, hence HMRC have recorded approx £5k less taxable interest.  I had no multi-year or fixed term accounts to confuse the issue.  

I have tried to reconcile their breakdown and they appear to have missed just under £5k from one bank, and about £300 from another.  Both banks are fairly mainstream and popular with MSE savers.

I had declared the £17.5k figure in my tax return for 23/24.  I had Personal Allowance, Starting Rate for Savings and Personal Savings Allowance available to set against the untaxed interest so there was nothing to pay either way.  It is however interesting that either two banks have failed to report, or HMRC were unable to match the reported interest to my personal tax account.

Were either, or both, ones who have involved an intermediary like HL Active Savings?

BreakingGlass

Dazed_and_C0nfused said:

BreakingGlass said:

It's a bit of an aside for this thread, but out of curiosity a couple of weeks ago I called HMRC and requested a statement of Bank and Building Society Interest (BBSI) for the 23/24 tax year, in order to check against my records.  The BBSI arrived today.

HMRC's letter states that my untaxed interest total for the year is just over £12k, made up of 36 listed accounts (all 'Actual - BBSI Pre-Pop' - hence details have been supplied by the Bank or Building Society).  Ten of the listed accounts had zero interest.

My self-calculated total for the same year is untaxed interest of just over £17.5k, hence HMRC have recorded approx £5k less taxable interest.  I had no multi-year or fixed term accounts to confuse the issue.  

I have tried to reconcile their breakdown and they appear to have missed just under £5k from one bank, and about £300 from another.  Both banks are fairly mainstream and popular with MSE savers.

I had declared the £17.5k figure in my tax return for 23/24.  I had Personal Allowance, Starting Rate for Savings and Personal Savings Allowance available to set against the untaxed interest so there was nothing to pay either way.  It is however interesting that either two banks have failed to report, or HMRC were unable to match the reported interest to my personal tax account.

Were either, or both, ones who have involved an intermediary like HL Active Savings?

No.  Chase and Tandem - the latter the larger amount (and they provided two Certificates of Interest that agree with my figures).