Personal Savings Allowance guide

Dazed_and_confused

There's nothing more than that yet as as i know, my tax code isn't affected by my interest but it forms part of the breakdown given in the personal tax account.

I doubt HMRC have got all the info from the banks yet for 2016:17 so too early for more info to show up yet i guess.

The figures on my account were what i had supplied in the past and rolled forward each year.

ColdIron

I'd judge getting to the 3 questions bit to be a success

"Do you have investment income that is incorrect?", "Do you have investment income that is missing?" and "Do you have investment income that has ended?"

Alan_Rebeiro

It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!

isasmurf

Alan_Rebeiro wrote: »

It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!

This is a known error in the online SA specification - see https://www.rossmartin.co.uk/sme-tax-news/2634-software-specification-error-affects-2016-17-self-assessment

polymaff

Alan_Rebeiro wrote: »

It is now apparent from filling in an online self assessment return for 2016/17 that the first £1000 of tax free interest on savings is still subject to tax for a basic rate tax payer! This should applied if net adjusted income is over £17,000 (e.g. pension contributions and gift aid among others) but the HMRC online system is not applying this threshold.

The headline allowance of £1,000 tax free interest is therefore not only inaccurate but millions who do not have to complete a self assessment return are potentially liable for tax on all savings interest below £1,000 but HMRC will not be able to apply that in practice. Therefore, it seems the self employed in particular are at an unfair disadvantage having to always submit a self assessment return. The government policy is now very questionable or HMRC have something to explain.

Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!

The £1,000 PSA is only available to individuals with at least £1,000 in taxable savings income, and with an adjusted total taxable income of less than £43,000. Is this si in your case?

Consumerist

Alan_Rebeiro wrote: »

. . . Hoping a tax expert may let me know if the £1,000 savings interest allowance is not what it says on the tin!

Well, I'm no expert but if you only earn £50 interest in a year then you'll only be entitled to tax relief on £50.

The allowance gives tax relief on up to £1,000 interest pa if you're a BR taxpayer.

grey_gym_sock

HMRC have indeed admitted that there are multiple errors in the online SA calculation. however, those errors don't quite seem to match the issue alan describes. it's been admitted that the £5,000 0% starting rate for interest is not applied properly, but i haven't seen any admission that the £1,000 (for basic-rate taxpayers) PSA for interest isn't applied correctly.

to see what's going on, i would be interested in alan's total figures for
(a) interest
(b) dividends (if any)
(c) all other taxable income
and how much income tax the system says is due (... or, if you'd rather not disclose so much info, whatever you're happy to reveal).

polymaff

isasmurf wrote: »

This is a known error in the online SA specification - see https://www.rossmartin.co.uk/sme-tax-news/2634-software-specification-error-affects-2016-17-self-assessment

Those errors are to do with the starting rate for savings, not the PSA.

Dazed_and_confused

Alan Rebeiro

Without some figures it's impossible to know what's gone wrong (if anything) but two things to clarify,

Tax free interest, such as from an ISA doesn't need to be entered on a self assessment return

All other interest is still taxable income, there is no "tax free" amount. There is a 0% rate band called, somewhat unfortunately, the Personal Savings Allowance which could be relevant to savings interest. This is not an allowance in the normal sense.

Doc_N

Given the two current statements below from the HMRC website, is it safe to assume that no declaration of £1000+ interest needs to be made to HMRC by those of us not making SA returns? And that HMRC will sort it out on the basis of information they hold?

Or is that pie in the sky?


"If you go over your allowance

You’ll pay tax on any interest over your allowance at your usual rate of Income Tax.

If you’re employed or get a pension, HMRC will change your tax code so you pay the tax automatically.

If you complete a Self Assessment tax return, report the extra interest there."




"What you need to do

You don’t need to do anything to claim your Personal Savings Allowance.

If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.

HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

If you fill in a Self Assessment tax return you should carry on doing this as normal."