Personal Savings Allowance guide

Sadsaver

colsten wrote: »

I mean the link I posted in post #23. You must have overlooked it.

Thanks Colsten, i missed your link on post 23. It looks pretty unequivocal, despite MSE's information page on the new online Tax Assesment procedure.

Sadsaver

Nual wrote: »

I think I am going to take VR from March, and will have a DB pension of around 14k ( waiting for exact figures) I will also have around 1500 in interest on savings.

I had assumed that my pension would be taxed at source above the 10800 pa, and that I would also pay tax on interest above 1k , but reading this and the other thread it seems that if the total is below 16800 I wont have any tax to pay. Is this correct?

I am in a similar situation to Nual, in that i also earn approx £15,000 gross total with my public sector pensions, but my gross taxable savings interest could be around £3000, not including ISA's. This would give me a total gross taxable income of around £18,000 in the 2016/17 tax year. Does this mean i can claim the tax allowance on £1,800 of savings Interest, rather than just the basic £1000, which is the difference between my pension income of £15,000 and the low income threshold of £16,800?
I have read the guidance links posted on this forum, but don't know if this applies to people who exceed the total of £16,800 with their taxable savings interest added to their taxed pension income?

colsten

According to this Treasury flyer: If your total income [from pension & savings] is £18,000, you'll have to pay BR tax on £1,200, i.e. £240.

Example 2 in that flyer comes closest to your numbers. If yu want to know exactly how it is calculated, you need to read up about the 0% savings tax band as this comes into play in your circumstances.

Sadsaver

colsten wrote: »

According to this Treasury flyer: If your total income [from pension & savings] is £18,000, you'll have to pay BR tax on £1,200, i.e. £240.

Example 2 in that flyer comes closest to your numbers. If yu want to know exactly how it is calculated, you need to read up about the 0% savings tax band as this comes into play in your circumstances.

Yes, it seems the 'flyer' does seem to confirm that i should only pay tax at BR on around around £1,200 of my savings interest in 2016/17. Thanks for all your kind assistance, Colsten.

Similarly, from reading all the information on the current 2015/16 tax year. It would also appear that my wife would be able to claim a partial rebate on her Tax paid on savings interest, via the HMRC form R40, as her gross pension income is around £14,000, with addition savings Interst of approx £2,000. I believe the low income threshold is set at £15,600 in the current tax year, so she should be able to claim a rebate of around £320 on her Savings Interest at the end of this financial year, if i have got that right? I had no idea about this new tax allowance on savings interest until reading the posts on this useful forum!

bassanus

Hi, Just joined as am trying to find the answer to this question. When the new rules come in will the £1,000 limit include interest earned on ISA's. As these are currently tax free will this continue and the £1,000 limit be calculated on 'other' savings interest income only or on the total on interest earned ie including ISA's?

bowlhead99

Income and gains inside ISAs are exempt from tax and will stay that way.

The new allowance is for people who are earning income outside ISAs and applies against income which is NOT already hidden in ISAs. However many thousand a year of interest or dividends or other gains you make in ISAs, does not affect your 'other' savings accounts interest, which are subject to tax and subject to the new allowance. ISA returns cannot affect the size of the allowances or the income levels to which they apply.

LeighLad

Just got my tax code. They have reduced it by last years declared gross savings income, so each month I will now be getting paid less. Called HM Tax and was told I couldnt set this to zero and pay at end of year, so given most savings accounts pay yearly, and interest rates are going down, take the following example
new tax code (over estimated savings revenue) year 1 and savings that mature month 12

1/ Month 1 I'm taxed on imterest yet to be recieved
2/ ditto to around month 9 when I get another tax code over estimated for year 2
3/ Month 12 finally get income that was taxed in advance
4/ Get overtaxed in year 2 on yet to recieve income
5/ Finally get refund for year 1 (probably around month 6 intax year 2)
6/ Get tax code adjusted for year 2

in perpetuity.

So, I'm overtaxed on income I haven't recieved which would create a cash flow problem. HM tax can take their own sweet time refunding my overpay on 2yrs worth). Furthermore this would affect many more people, particularly pensioners who have taken and invested a lump sum.

Summary
Cash flow problems
Loss of that money to generate interest
Free loan to HM tax
More people filling in tax returns
Folks in their 80's having to file tax returns just because they save.
HM TAX SAYS I CANT SET INTEREST TO ZERO AND PAY END OF TAX YEAR

Sounds quite immoral to me.

Pdman

Anybody else had a similar coding to Leighlad?

colsten

LeighLad wrote: »

Called HM Tax and was told I couldnt set this to zero and pay at end of year

You need to contact them again and tell them you will not have any / less savings interest than in the previous year.

You can use this form to request adjustment of your tax code: https://online.hmrc.gov.uk/shortforms/form/P2

masonic

Pdman wrote: »

Anybody else had a similar coding to Leighlad?

There are only two situations I'm aware of in which someone would be in a position to underpay tax on savings interest. Either they are a higher rate taxpayer, or they have over £50,000 saved in a legacy fixed rate savings account. In either of those cases, I'm not quite ready to break out the violins over them not being able to manage the cash flow implications.

As far as I'm aware, if you declare under-taxed savings income, HMRC do indeed assume the same income will arise in the following tax year and adjust your tax code accordingly. Essentially, this means that if you are receiving a monthly income through PAYE, you spread the cost of the unpaid tax across the whole tax year, in effect paying in installments. That doesn't seem particularly "immoral".

I would have underpaid income tax for the first time in this tax year owing to my P2P investments, but I have dodged the issue by contributing enough into a VCT to more than offset the untaxed income, so I'll be looking forward to a refund instead.

How this is all going to work when the personal tax account is introduced soon is anyone's guess, but there has been talk of it being handled a lot more accurately.