Tax Free Savings Guide

SSSteevo

Hello, hope you can help. Hope I am posting in the right forum.

I am trying to do my tax return but spent a lot of time researching so that I don't do any mistakes.
I have savings interest (non-ISA) of approx £150 in the 2018-2019 tax year. I am a lower rate tax payer this year. Only doing a tax return as last year I had to pay two and a half grand in high income child benefit charge and HMRC is demanding I do a tx return despite my income being much lower this year.

I have savings interest (non-ISA) of approx £150. This is below the Personal savings allowance (PSA) threshold of either £1000 for low earners and £500 for higher earners.

My question is, should I enter the total interest of £150 on my tax return's interest field or whether I am only required to enter the interest earned ONLY if it has gone over the PSA threshold?

So the guidance on the tax return itself (question marks by the side of each field) is rather poor and basic.

So I phoned the HMRC. They said they have no information passed to them by the banks about my personal interest payments, but if I am entering interest on my tax return it has to be the total interest (i.e. not the excess over the PSA).

The reason I am confused about this is because the HMRC webpage on the PSA (sorry tried entering a link here, but as a new user I am not allowed to enter links apparently)
states "If you complete a Self Assessment tax return, report the extra interest there." So that to me suggests that I should enter the interest in excess of the PSA on my tax return, but the HMRC staff told me otherwise.

ColdIron

You should enter the total interest you earned, so £150. HMRC will apply whatever allowance you are due

SSSteevo

ColdIron wrote: »

You should enter the total interest you earned, so £150. HMRC will apply whatever allowance you are due

Thank you. I find the whole thing confusing and a waste of time. It seems most of my information is already accessible to HMRC from my conversation with them as I am a PAYE tax payer.

Dazed_and_confused

Firstly there is no "allowance" for savings interest.

Some of it may fall to be taxed at either one of the 0% tax rates applicable to savings interest but as ColdIron has said you have to include it on your tax return.

The reason I am confused about this is because the HMRC webpage on the PSA (sorry tried entering a link here, but as a new user I am not allowed to enter links apparently) states "If you complete a Self Assessment tax return, report the extra interest there." So that to me suggests that I should enter the interest in excess of the PSA on my tax return, but the HMRC staff told me otherwise.

That wording is confusing and incorrect. The HMRC staff have told you the correct thing to do.

It is quite possible for savings interest taxed at 0% to increase your overall liability. High Income Child Benefit Charge is one such scenario. You could have say £500 interest taxed at 0% courtesy of the savings nil rate of tax. The income tax due on this £500 is nil but you could have to pay 5% of the Child Benefit back as a consequence of having the £500 interest.

Silverbird65

Please explain this seems complicated how do you work out were you are??

veryintrigued

Any news on the 20/21 ISA levels now the budget is out?

Alexland

veryintrigued said:

Any news on the 20/21 ISA levels now the budget is out?

Yes in this thread
https://forums.moneysavingexpert.com/discussion/6113533/2020-21-isa-limits

ddss

PAYE coding is trying to collect tax on interest over £1000 (not yet) paid in current tax year.  Can they insist on this? Based on estimate which is year before last (self-assessed) and now wildly optimistic.  When I asked for a reduction, they showed no signs of understanding my query.

eskbanker

ddss said:

PAYE coding is trying to collect tax on interest over £1000 (not yet) paid in current tax year.  Can they insist on this? Based on estimate which is year before last (self-assessed) and now wildly optimistic.  When I asked for a reduction, they showed no signs of understanding my query.

Perhaps it's because you shouldn't 'ask for a reduction' or be making a 'query' as such, you should be telling them that their estimate of savings interest is inaccurate and request that the tax code be adjusted accordingly.

https://www.gov.uk/check-income-tax-current-year

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

ddss

eskbanker said:

ddss said:

PAYE coding is trying to collect tax on interest over £1000 (not yet) paid in current tax year.  Can they insist on this? Based on estimate which is year before last (self-assessed) and now wildly optimistic.  When I asked for a reduction, they showed no signs of understanding my query.

Perhaps it's because you shouldn't 'ask for a reduction' or be making a 'query' as such, you should be telling them that their estimate of savings interest is inaccurate and request that the tax code be adjusted accordingly.

Well that is what I did.  An estimate of a future event is usually going to be inaccurate.

check-income-tax doesn't have a reference to untaxed interest (for me)