Personal Savings Allowance guide

xylophone

See also http://www.moneysavingexpert.com/savings/tax-free-savings

"What's tax-free savings and the starting savings rate? Simply put, for most people these mean that if you earn less than £17,000 a year in income and savings interest combined, you won't have to pay any tax on the interest paid on the savings."


The OP's total income for the year ( interest and salary combined) is only £13,000.

Dazed_and_confused

xylophone

Fair point if I hadn't included this as my next paragraph!!

Wages £11000 - covered by personal allowance
Savings interest £2000 taxable at the savings rate of 0% (so no tax to pay).

Ashen

Dazed_and_confused wrote: »

Ashen

From the limited info in your post you will not be entitled to the personal savings allowance.

If your total income is wages £11000 plus savings interest £2000 then the savings interest will all be taxable and your tax position would be as follows,

Wages £11000 - covered by personal allowance
Savings interest £2000 taxable at the savings rate of 0% (so no tax to pay).

If your wages were £11000 and savings income £5100 then it would still all be taxable but you would be entitled to the personal savings allowance and would be taxed,

Wages £11000 covered by personal savings allowance
Savings interest £5100 taxed as
5000 x 0% (savings rate band)
100 x 0% (personal savings allowance rate band)

It would help if you could say if the £11000 and £2000 is your only income and what your new tax code is (and how it's made up if not the bog standard 1100L)

Thanks for this, although I'm a little bit confused. Are you saying that, if a person's combined income and savings interest is under £16,000, it is correct for HMRC to show someone as having no Personal Savings Allowance for the reason that it would end up being covered by the 0% savings rate instead? Obviously it wouldn't affect the tax paid, but why not just say £1,000 PSA anyway to avoid confusion like this?

If so, I can accept it, but don't understand why my tax code would be reduced at this point on the basis of savings, when presumably those with a PSA of £1,000 wouldn't. Presumably they would refund anything after the end of the year when realising my full income is under £16,000/£17,000?

Approx £11000 is my only income, plus approx £2000 savings interest shown on HMRC site for the calculation, and tax code 1081L changed from 1100L due to deductions because of savings income. Those income figures aren't exact, but very close.

Consumerist

Ashen wrote: »

. . . Approx £11000 is my only income, plus approx £2000 savings interest shown on HMRC site for the calculation, and tax code 1081L changed from 1100L due to deductions because of savings income. Those income figures aren't exact, but very close.

You may find it helpful to see <MSE's Tax-free Savings> page.

xylophone

although I'm a little bit confused.

From the previous tax year's guidance 2015-16

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim1112

"Where an individual’s non-savings income is less than the starting rate for savings limit, the savings income will be taxable at the 0% starting rate for savings up to the limit. From 6 April 2015 the starting rate for savings limit is the individual’s personal allowances plus the starting rate band of £5,000."

See also below ( for tax year 2016-17).


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



For the tax year 2016-17, the Personal Savings Allowance (£1000 /£500 as appropriate) is on top of the "Starting Rate for Savings Limit".

In your case, your total taxable income seems to be around £13,000 so that you will pay no tax on your savings interest.

See also http://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me

http://www.litrg.org.uk/sites/default/files/files/Savings%20and%20dividend%20tax%20FINAL.pdf

Have you rung HMRC to enquire about the code adjustment?

Ashen

I've read through about the various allowances, and think I have a firm grasp of it. Basically the main part of my query stems from the HMRC site saying I have a PSA of £0, whilst at the same time also showing my combined income to be approx £13K.

'Dazed and confused' said I "will not be entitled to the personal savings allowance", which ties up with that £0 figure. I have no doubt I'm entitled to savings interest without tax being taken, but just wondering if HMRC's system may not allocate a PSA figure if someone's savings income doesn't exceed the amount that they're entitled to at the 0% starting rate.

I realise this wouldn't make a difference in terms of tax paid, but would explain why HMRC's site says my PSA is £0.

I haven't yet contacted HMRC, previous posts on this thread seemed to suggest sometimes they themselves are confused about the savings allowances, and would ideally like to establish things so I'm sure myself first. I will do so though, especially with the tax code issue.

xylophone

Is your salary exactly £11000 or just over or just under?

See also post 251.

polymaff

Ashen. What HMRC mean is that you are USING £0 of the PSA this year - not that you've been deprived of it..

And, Yes, what is your EXACT non-savings taxable income?


If you'd like to experiment with different combinations of income, try this:

http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9

Consumerist

xylophone wrote: »

Is your salary exactly £11000 or just over or just under? . .

That question also occurred to me. If slightly more than £11k then some tax would be payable on the excess but I don't quite understand why that should lead to a change in tax code.

One possibility is that some tax is owed from last year which is being collected through an adjustment to this year's tax code.

Ashen

Bit of a delay on an update here, but HMRC had me on a tax code of 1081L, with estimated income from employer of £10815, saying that deduction had been made due to savings interest.

I updated that income to £11100 on the site, which is what I calculated it should be, and it changed my reported tax code to 1100L, and the reference to any deduction being made due to savings interest has disappeared.

polymaff wrote: »

Ashen. What HMRC mean is that you are USING £0 of the PSA this year - not that you've been deprived of it..

I think HMRC really should reword the section if that's the case, as it's potentially confusing:
http://i.imgur.com/FOigXow.png