2016 no tax on first £1000 interest earned

zagfles

Dazed_and_confused wrote: »

Are you sure about these figures? There is some new information on gov.UK that says the new savings allowance will actually use up some of the 20% tax band, pushing more income into the 40% band

"Income that is within an individual’s savings allowance will still count towards their basic or higher rate limits - and may therefore affect the level of savings allowance they are entitled to, and the rate of tax that is due on any savings income they receive in excess of this allowance"

Which it does!! The basic rate band is £32000, the example above shows £31500 charged at 20% because £500 savings allowance uses up £500 of the basic rate band. Leaving the last £1 charged at 40%

Eco_Miser

Dazed_and_confused wrote: »

Are you sure about these figures? There is some new information on gov.UK that says the new savings allowance will actually use up some of the 20% tax band, pushing more income into the 40% band

It doesn't push income into the 40% band - that part is exactly the same as if the PSA didn't exist (£1 in the example above). What it does is make the first £500 of savings income taxed at 0% instead of 20%/40%, depending on which band that £500 lies within (could be both).
For someone whose total income is below the 40% band, it makes the first £1000 of savings income taxed at 0% instead of 20%.

zagfles

Eco_Miser wrote: »

It doesn't push income into the 40% band - that part is exactly the same as if the PSA didn't exist (£1 in the example above). What it does is make the first £500 of savings income taxed at 0% instead of 20%/40%, depending on which band that £500 lies within (could be both).

This is just semantics - but it does "push income into the 40% band" by the £500 tax free interest using up some of the basic rate band (even though basic rate tax is not charged on it). As opposed to ISA interest which doesn't use up any allowance or tax band.

JLYork

I’d just like to share my experience with HMRC in trying to get my 2016/17 tax code sorted out as it would seem to re-enforce the opinion that they haven’t got it sorted it yet! I received my tax code in January and this included the £1000 PSA and a very high ‘Less Untaxed Interest’ figure (nearly double my expected interest). I went online and the code given there was slightly more realistic but still wrong. I filled the online form to query the figures and received a reply to say they had sorted the issue out – on checking online there is now no PSA listed and no ‘Less Untaxed Interest’ so they have now totally ignored savings interest altogether! My wife has also completed the online query form as her calculation is even more unrealistic. I should point out that all our non ISA savings are jointly held so we have halved our figures for expected interest.

Before I fill another online form in does anyone know how the PSA/Less Untaxed Interest calculation should work? For example, if your total interest is expected to be £2000, should both figures be £1000 in order to ensure tax is only paid on the £1000 above the PSA?

I'd just like to get it right rather than have to claim or pay back at the end of 2016/17.

mel48rose

Think the system's going to be in chaos next year :eek:

moneyfoolish

JLYork wrote: »

I’d just like to share my experience with HMRC in trying to get my 2016/17 tax code sorted out as it would seem to re-enforce the opinion that they haven’t got it sorted it yet! I received my tax code in January and this included the £1000 PSA and a very high ‘Less Untaxed Interest’ figure (nearly double my expected interest). I went online and the code given there was slightly more realistic but still wrong. I filled the online form to query the figures and received a reply to say they had sorted the issue out – on checking online there is now no PSA listed and no ‘Less Untaxed Interest’ so they have now totally ignored savings interest altogether! My wife has also completed the online query form as her calculation is even more unrealistic. I should point out that all our non ISA savings are jointly held so we have halved our figures for expected interest.

Before I fill another online form in does anyone know how the PSA/Less Untaxed Interest calculation should work? For example, if your total interest is expected to be £2000, should both figures be £1000 in order to ensure tax is only paid on the £1000 above the PSA?

I'd just like to get it right rather than have to claim or pay back at the end of 2016/17.

I received my 2016/17 tax code notice last week. I am retired with 2 pensions plus the state pension and am a PAYE standard rate taxpayer. My notice showed a Personal Allowance of £11000 with a reduction for the State Pension and another reduction for a small underpayment from the previous year. That in itself was interesting because the underpayment was for £91 (pretty much what I had calculated) but the note relating to it on the notice stated that they had previously told me that I owed this amount and that's news to me because I haven't received anything from them telling me this! However, back to the notice! There was no "Less Untaxed Interest" figure even though I received a fair amount of interest on bank accounts last year which was obviously taxed at the standard rate. I have estimated that I will receive approximately £2500 in bank interest in the 2016/17 tax year which will leave £1500 taxed at standard rate and, like yourself, prefer to pay this as I go along through a tax code adjustment. I telephoned the number on the tax code notice and told them my estimate for interest and they have adjusted my tax code and, hopefully, will send me an updated tax code notice.

colsten

moneyfoolish wrote: »

I received my 2016/17 tax code notice last week. I am retired with 2 pensions plus the state pension and am a PAYE standard rate taxpayer. My notice showed a Personal Allowance of £11000 with a reduction for the State Pension and another reduction for a small underpayment from the previous year.

What is the reduction for the state pension? Surely your personal allowance is £11,000 whether or not you are in receipt of state pension?

FOREVER21

colsten wrote: »

What is the reduction for the state pension? Surely your personal allowance is £11,000 whether or not you are in receipt of state pension?

State pension is taxable income, but DWP can not deduct tax at source so HMRC deduct the expected amount of state pension from the personal allowance.
They have used this method for many years.

colsten

Well I never knew that. Now I do, thanks!

SallySunshine

I've just received my new tax code and nearly had a fit.
25L down from 432L last year.
Nothing has changed, I get a state pension and a government pension.
For the last few years the code has varied slightly but made sense.

After lots of searching around, I gave up and rang HMRC.
It turns out I would have paid a lot more tax this year with this code, but was informed I could have reclaimed it!
They seem to have put in £5300 under Less Untaxed Interest, this happened last year, although my tax code was correct and I was told not to worry it was just a generic figure!
It never dawned on me but looking back that figure was put down as B/S interest in 2012/2013

That does not sound right as we have joint accounts. Plus my husband and I always claimed interest back by S/A. I don't now as I am over the allowance.
However it look like that figure keeps being used although why it altered my tax code this time is another mystery, seems it's to do with some shake up within HMRC.
The outcome is my code is now altered to 455L, so I suppose it was worth hanging on their phone line for ages listening to dire jazz-type music.