Personal Savings Allowance guide

teddysmum

Just to further confuse :


In post #220, I stated what the second HMRC person I spoke to, told me, (after originally speaking to someone who could not answer).


After the first (useless) call, I contacted (and forgot I'd done so) a website called The Low Incomes Tax Reform Group, asking if they could clarify.


They have just replied ( and I quote below), giving the opposite response. They say that the Marriage Allowance does not factor into the savings interest allowance calculation.


The example, from my email,that they refer to is of a man earning £14100, having taken the extra £1100 of PA from his wife.


Thank you for your email to the LITRG website, below. I apologise for the delay in coming back to you – we are a small group and cannot always reply immediately.

The Marriage Allowance is poorly named, as – for the person receiving it – it is not an allowance at all, it comes into their tax calculation as a tax reduction.

So in the example you give below, the person with earnings of £14,100 would have a personal allowance of £11,000, leaving taxable income of £3,100. It is this figure that would then come off their starting rate for savings band of £5,000, leaving them £1,900 of that band.

It is different to the blind person’s allowance, as that comes off at the same point in the calculation as the ordinary personal allowance. So too – somewhat curiously! – does a transferred blind person’s allowance.

You are right that the member of the couple who loses part of their personal allowance still has their full starting rate for savings band. We are currently discussing related issues with HMRC, as their policy seems to be only to allow marriage allowance claims where one partner’s income is below the personal allowance. This requirement is not in the law – only that you must not be a higher or additional rate taxpayer. We are trying to show HMRC that there are situations where it may be advantageous to claim the marriage allowance in order to maximise other tax bands such as the starting rate for savings.

Your enquiry is therefore very well timed and will be helpful to us in illustrating this to HMRC. I hope in turn the above helps to clarify things for you, although unfortunately the answer confirms that the less favourable calculation you gave was in fact the correct one!

Best regards,

Kelly Sizer
Senior Technical Manager

MHxhill

Can anyone confirm the status of Corporate Bonds? MSE & HMRC both suggest that earnings will be included in the new savings tax allowance but this doesn't make sense to me. My Corporate Bond calls itself an investment, not a savings product.
I went to the bank where I took it on ten years ago but they don't deal with this sort of product now and no one knew anything about its tax status under the new rules. On phoning the relevant number, no one there knew about it either. All that they could say was that they would continue to deduct tax at source and referred me to HMRC for more information.
My understanding, given that tax will still be deducted at source, is that my Corporate Bond earnings won't be included in the new allowance.
Have I got this right?

Consumerist

MHxhill wrote: »

. . . My understanding, given that tax will still be deducted at source, is that my Corporate Bond earnings won't be included in the new allowance.

That's how I understand the situation. These earnings will be included in your gross taxable income but not as interest on savings.

Edit
I don't know whether an article by <This is Money> will help clarify the difference between bonds and savings.

xylophone

See https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

"Savings income includes account interest from:

bank and building society accounts
accounts with providers like credit unions or National Savings and Investments
It also includes:

interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts
income from government or company bonds
most types of purchased life annuity payments"

See also http://www.telegraph.co.uk/personal-banking/savings/the-personal-savings-allowance-is-in-force---but-dont-wave-goodb/

"Although bond interest is treated in the same way as savings interest for tax purposes, and is eligible for the new allowance, fund firms are not yet ready to pay investors gross interest.

So while banks and building societies have started to pay interest gross, fund companies will continue to deduct tax from interest until April next year."

MHxhill

Thanks for this helpful information. I think it could be a smart move for me to transfer this year's ISA allowance from my OEIC sub-fund into the ISA sub-fund and to do the same next year. Why is finance so complicated?

bigadaj

MHxhill wrote: »

Thanks for this helpful information. I think it could be a smart move for me to transfer this year's ISA allowance from my OEIC sub-fund into the ISA sub-fund and to do the same next year. Why is finance so complicated?

Not too complicated, it should, be a very straightforward process.

This process of bed and isa is common and easy, and has the added benefit of protecting from capital gains tax as well.

Might be an opportunity for a portfolio review if this has been held for ten years as well.

xylophone

Why is finance so complicated?

Join the Andy Haldane Club?:D

Sadsaver

Can anyone please help?
HMRC have imposed a reduced Tax Code on my wife in anticipation of Tax being owed on her Taxable Savings interest in 2016-17.
However, she only earns £15,000 gross income on her pensions in 2016-17. She should therefore be entitled to earn £2,000 Interest on her taxable savings in 2016-17, without paying any tax on them.
She will earn more than £1,000 in savings interest, but much less than £2,000, so she should therefore owe no tax on her savings.
The HMRC's own GOV.UK 'Tax on Savings interest' web page clearly states, 'If your total taxable income is £17,000 or less, you won't pay any tax on your savings interest'
My wife and I have telephoned the HMRC's call centre twice to explain, but on both occasions, the call handler didn't understand the new regulations, and just fobbed us off!
Can anyone please advise us how we can persue the matter further?

Consumerist

Sadsaver wrote: »

Can anyone please help?
HMRC have imposed a reduced Tax Code on my wife in anticipation of Tax being owed on her Taxable Savings interest in 2016-17.
However, she only earns £15,000 gross income on her pensions in 2016-17. She should therefore be entitled to earn £2,000 Interest on her taxable savings in 2016-17, without paying any tax on them.
She will earn more than £1,000 in savings interest, but much less than £2,000, so she should therefore owe no tax on her savings.
The HMRC's own GOV.UK 'Tax on Savings interest' web page clearly states, 'If your total taxable income is £17,000 or less, you won't pay any tax on your savings interest'
My wife and I have telephoned the HMRC's call centre twice to explain, but on both occasions, the call handler didn't understand the new regulations, and just fobbed us off!
Can anyone please advise us how we can persue the matter further?

Your wife will be using £4,000 of her 0%-tax band for low incomes (£15,000 gross income - £11,000 PA). But, as I understand it, this £4,000 allowance will not be assessed until the end of the 2016/17 tax year when her total taxable income for the year can be verified - she may, for example, get a part-time job, etc. In the meantime HMRC will give her only the £1,000 PSA applied through her tax code.

Sadsaver

Consumerist wrote: »

Your wife will be using £4,000 of her 0%-tax band for low incomes (£15,000 gross income - £11,000 PA). But, as I understand it, this £4,000 allowance will not be assessed until the end of the 2016/17 tax year when her total taxable income for the year can be verified - she may, for example, get a part-time job, etc. In the meantime HMRC will give her only the £1,000 PSA applied through her tax code.

Thanks for your reply, but as stated, my wife is retired & in receipt of a public sector pension, and therefore will get no increase on her pension in the 2016-17 tax year. So, therefore she wont get a 'promotion' & has no intention of getting a job! All this has been explained to HMRC over the phone, but they didn't understand the concept of the new regulations on savings.
I am in a very similar situation to my wife and HMRC havent reduced my tax code.