Personal Savings Allowance guide

Wildsound

Nigel1 wrote: »

Sorry if I might have missed this somewhere earlier in the thread, but has anyone raised the issue of the PSA apparently being frozen in time? When other allowances go up to take account of inflation, the £1000 from 2016 has not. Is the another Government wheeze to hit those with savings by quietly eroding the allowance? :mad:

I don't think inflation really has any effect on the allowance as it is interest rates which would cause a problem. If interest rates were too shoot up and cash savings suddenly start producing a return of such, then the (currently) fixed PSA would probably cause some problems for people.

polymaff

Nigel1 wrote: »

Sorry if I might have missed this somewhere earlier in the thread, but has anyone raised the issue of the PSA apparently being frozen in time? When other allowances go up to take account of inflation, the £1000 from 2016 has not. Is the another Government wheeze to hit those with savings by quietly eroding the allowance? :mad:

The Rooker-Wise Amendment is well and truly dead.

At least the PSA hasn't suffered the fate of the DA - index-linked by -60%

schiff

Eco_Miser wrote: »

When we switched from the Julian to Gregorian calendar, we 'lost' days, but the treasury just moved the year end to be 365 days after the previous year end.
Why the year end was previously Lady Day, I've no idea.

To celebrate Billie Holiday probably

Harrhy

Until April 2016 savings in building societies and banks were taxed at source. If you didn’t earn enough you could elect to have the interest paid gross.
When the Personal Savings Allowance was introduced all savings were paid gross without the deduction of tax but there was no option to have the interest taxed and paid net.
If you earn more than £1000 interest a year then you are faced with having your tax code changed by HMRC to collect the money owing long after the interest has been received and thus at any point in the future you may receive less income than might have been expected.
Why can’t we have the option to pay the tax up front if we wish, have it deducted by the building society or bank and allow HMRC to refund any surplus? The system was obviously already set up to do this in the years up to 2016.
I have always had my income taxed at source and at this point as a pensioner I don’t wish to start corresponding with HMRC over payments in arrears which can often vary greatly from year to year, due to the existence of fixed rate bonds in particular.

Dazed_and_confused

Sounds like a question for your MP.

Harrhy

That's not a bad idea!

zagfles

Harrhy wrote: »

Until April 2016 savings in building societies and banks were taxed at source. If you didn’t earn enough you could elect to have the interest paid gross.
When the Personal Savings Allowance was introduced all savings were paid gross without the deduction of tax but there was no option to have the interest taxed and paid net.
If you earn more than £1000 interest a year then you are faced with having your tax code changed by HMRC to collect the money owing long after the interest has been received and thus at any point in the future you may receive less income than might have been expected.
Why can’t we have the option to pay the tax up front if we wish, have it deducted by the building society or bank and allow HMRC to refund any surplus? The system was obviously already set up to do this in the years up to 2016.
I have always had my income taxed at source and at this point as a pensioner I don’t wish to start corresponding with HMRC over payments in arrears which can often vary greatly from year to year, due to the existence of fixed rate bonds in particular.

Because the vast majority of people earn less than £1000 in interest, so for the vast majority not taxing interest at source is the right thing to do.

It's like people who pay higher rate tax, under the old system they always had to declare interest and pay additional tax, on top of the tax at source. It would have been silly for everyone to have paid tax at 40% just because a minority had to. Same now, just because a small minority have to pay tax on interest, it would be silly for everyone to have to and then for the majority to have to claim back the excess tax.

Harrhy

I am suggesting that the default situation is that the interest is paid gross so that most people do not pay tax, but that that there should be an option for those who do wish to pay the tax up front to elect to do so by filling in a form. This was the situation in 2016 before the change. When my earnings were low I was able to elect to receive the interest tax free and not have it taxed at source as was then the normal position.
I am suggesting a reversal of the earlier position which would mean that those who had savings earning less than £1000 interest per annum would not have to do anything. You would only pay tax up front if you elected to do so in order to simplify your tax position.

Dazed_and_confused

To be honest the £1,000 is a bit of a red herring. Plenty of people posting on here can't benefit from that because the Personal Allowance and savings starter rate come first.

Good luck trying to explain all that to Joe public!

masonic

Harrhy wrote: »

I am suggesting that the default situation is that the interest is paid gross so that most people do not pay tax, but that that there should be an option for those who do wish to pay the tax up front to elect to do so by filling in a form. This was the situation in 2016 before the change. When my earnings were low I was able to elect to receive the interest tax free and not have it taxed at source as was then the normal position.
I am suggesting a reversal of the earlier position which would mean that those who had savings earning less than £1000 interest per annum would not have to do anything. You would only pay tax up front if you elected to do so in order to simplify your tax position.

It's not quite as simple as that, because those earning more than £1000 in interest (or higher rate taxpayers earning more than £500), will not pay tax on all of their interest. What you suggest would require someone to fill out a form to get tax taken off at source, and then fill out another form to claim back overpaid tax. It would be simpler just to fill out one form - the self assessment tax return - and pay what you owe. It wouldn't surprise me if more people were funnelled down that route in future. PAYE seems unsuitable for the complexity introduced by the PSA.