Personal Savings Allowance guide

polymaff

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?

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.

I don't think that this is the case here. HMRC have no hard evidence on which to reduce the PAYE code for 2016/17 - but they are trying to get people to make Payments on Account. This should be resisted - and I hope that you will get HMRC to reset the PAYE coding, Sadsaver. This may mean that - if you are not already - you will have to get involved in the Self-Assessment process. At least once you do - there appears to be a means of stopping they trying this on again. Quote from 2015/16 SA100, section 4:

If you are likely to owe tax for the current tax year (ended 5 April 2017) on income other than employed earnings/pensions e.g. savings or the High Income Child Benefit Charge, do you want us to use your 2016-17 PAYE tax code to collect that tax during the year?

... NO!

Consumerist

Sadsaver wrote: »

. . . she wont get a 'promotion' & has no intention of getting a job! .

Your wife's intentions are of little concern to HMRC. The fact is that she may get a part-time job, etc. whether or not she currently intends to or not. HMRC will not give anyone an allowance based on the off chance that they might be eligible for it once all the facts are in.

Any overpaid tax will be refunded in due course.

Sadsaver

There are lots of reports now appearing in the media of thousands of people being dragged into 'Tax Chaos' by HMRC wildly over exagerating anticipated Savings Interest on individuals, who in reality are getting very little interest in the 2016-17 Tax Year. In some cases HMRC have assessed wrongly that some individuals will be earning thousands of pounds in fictitious Savings Income. The whole thing is a complete mess.
The form R40 is now redundant for this Tax Year, so there doesn't appear to be a mechanism for reclaiming overpaid tax on savings, unless of course you go down the 'self assessment' route, which is should be quite unnecessary for most ordinary folk on PAYE.

Consumerist

One possible way round this is to open a <Personal Tax Account>. This is not a Self-Assessment account.

Another is via the HMRC <Tax codes> site to fill in an online form. This is the route I used and it was sorted fairly quickly. You'll need your employer's tax reference (from tax coding notice).

Edit
The online query form is <here>.

polymaff

Sadsaver wrote: »

The whole thing is a complete mess.

Understatement of the year

This reveals something of the bent nature of HMRC. To try to implement an extension by stealth of Payments on Account like this shows the total lack of intellect within the organisation.

Archi_Bald

Consumerist wrote: »

One possible way round this is to open a <Personal Tax Account>. This is not a Self-Assessment account.

You don't open a Personal Tax Account. Everybody with an NI number has got one.

Consumerist wrote: »

Another is via the HMRC <Tax codes> site to fill in an online form. This is the route I used and it was sorted fairly quickly. You'll need your employer's tax reference (from tax coding notice).

not everybody is employed but everybody can use the form you linked to if there is a problem with their tax code.

Archi_Bald

Sadsaver wrote: »

There are lots of reports now appearing in the media of thousands of people being dragged into 'Tax Chaos' by HMRC wildly over exagerating anticipated Savings Interest on individuals, who in reality are getting very little interest in the 2016-17 Tax Year. In some cases HMRC have assessed wrongly that some individuals will be earning thousands of pounds in fictitious Savings Income. The whole thing is a complete mess.
The form R40 is now redundant for this Tax Year, so there doesn't appear to be a mechanism for reclaiming overpaid tax on savings, unless of course you go down the 'self assessment' route, which is should be quite unnecessary for most ordinary folk on PAYE.

I wouldn't call it chaos, and I have no reason to believe that I would be charged more tax than I have to legally pay.

The first thing to remember is that some 95%+ of savers will benefit from the Personal Savings Allowance without having to do anything at all. They just get up to £200 a year more in their pocket.

Of the remaining 5% or so, most will be familiar with doing tax returns, for the simple reason that they had to make them for years. Most tax returns are quite simple, particularly if your only income is from employment/pensions and from savings. Filling in a self-assessment online can take as little as 10 minutes, once a year.

Everybody should check their tax code. If it is wrong for any reason, it's very easy to change by phoning HMRC or by filling in their online form. Mine was wrong, I called them and they changed it there and then.

Calling the changes 'chaos' is just whipping up unjustified hysteria and showing a lack of understanding.

polymaff

Archi_Bald wrote: »

The first thing to remember is that some 95%+ of savers will benefit from the Personal Savings Allowance without having to do anything at all. They just get up to £200 a year more in their pocket.

Of the remaining 5% or so, most will be familiar with doing tax returns, for the simple reason that they had to make them for years. Most tax returns are quite simple, particularly if your only income is from employment/pensions and from savings. Filling in a self-assessment online can take as little as 10 minutes, once a year.

Everybody should check their tax code. If it is wrong for any reason, it's very easy to change by phoning HMRC or by filling in their online form. Mine was wrong, I called them and they changed it there and then.

Agreed, but Sadsaver is criticising the covert way in which HMRC is attempting to implement a Payments on Account system for many more taxpayers than previously.

Consumerist

Archi_Bald wrote: »

You don't open a Personal Tax Account. Everybody with an NI number has got one.

You have to register to access the account.

not everybody is employed but everybody can use the form you linked to if there is a problem with their tax code.

When I used it, I was asked to provide my tax reference. This should be found on your coding notice whether you're employed, retired or whatever.

Thanks for your help Archi Bald, I'm sure Sadsaver couldn't have got anywhere without it..

Sadsaver

Consumerist wrote: »

Your wife's intentions are of little concern to HMRC. The fact is that she may get a part-time job, etc. whether or not she currently intends to or not. HMRC will not give anyone an allowance based on the off chance that they might be eligible for it once all the facts are in.

Any overpaid tax will be refunded in due course.

The matter has now been resolved, as i wrote to HMRC on my wife's behalf with all the facts and figures, and they have now reinstated my wifes tax code to the full personal allowance, even though she will exceed the £1000 peronal tax allowance on her savings interest, but not the total taxable income of £17,000 in this tax year. So, quite rightly she will not be paying extra tax 'on account', like the HMRC initially wanted her to do.
We got nowhere by initally contacting HMRC by phone on two occasions to try to resolve the matter as both members of staff simply did not understand the new regulations at all! They were not aware that you could earn over the £1000 in savings interest and stll not owe any tax on them, if your total taxable income does not exceed £17,000.
Anyway, everything is now satisfactorily resolved.
Thanks to Polymaff and Consumerist for their comments & advice