Personal Savings Allowance guide

polymaff

gayn wrote: »

My tax code has been reduced by 15 because of interest earned, so next year i expect around £60 in interest so my tax free allowance will be reduced by 60 because of this. I am very close to my allowance limit each year so this means I will pay tax earlier even though there is a £1000 personal allowance on interest. Not sure how this works with hmrc after calling them but surely can't be right . This would make me pay tax earlier if I now go over my limit a little bit which nullifies the interest out surely !!

HMRC is keen to get tax in asap. They introduced a new version of Payments on Account to do this just after interest-taxed-at-source was abandoned. This process assumes that your interest next year will be the same as the year before - but it doesn't seem to assume that your allowances will be the same as the year before.

It gets messy, but it doesn't nullify the interest out - not yet.

Incidentally, I do Self Assessment, in which you can tell HMRC not to use your PAYE coding to collect tax on things such as taxable savings interest. If you don't do SA, then maybe you can arrange this over the 'phone?

See Box 2 and, especially Box 3, page TRG 13 in,

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/687369/sa150-notes_2018.pdf

Kass_Evans

I refer to your recent post regarding tax on savings interest in respect of NS&I Guaranteed Growth Bonds from 1 May 2019.
Does what you have quoted relate to all bonds? If so then the information given in posts 121-137 of 2016 is wrong.
Can you clarify the position regarding tax on savings interest ie when it should be declared.

Kass_Evans

Hi polymaff


HMRC Manual also quotes:


If an individual is unable to withdraw or have access to the interest when it is credited to their account, or has a specific product such as a bond, the interest will not arise and therefore they will not be taxable until they have access to the interest. HMRC staff should seek advice from BAI (Financial Products Team) where there is doubt about whether or not someone is entitled to interest.

polymaff

Kass_Evans wrote: »

Hi polymaff


HMRC Manual also quotes:


If an individual is unable to withdraw or have access to the interest when it is credited to their account, or has a specific product such as a bond, the interest will not arise and therefore they will not be taxable until they have access to the interest. HMRC staff should seek advice from BAI (Financial Products Team) where there is doubt about whether or not someone is entitled to interest.

True, but NS&I GGBs are, currently, easy access accounts.

Dazed_and_confused

My tax code has been reduced by 15 because of interest earned, so next year i expect around £60 in interest so my tax free allowance will be reduced by 60 because of this. I am very close to my allowance limit each year so this means I will pay tax earlier even though there is a £1000 personal allowance on interest. Not sure how this works with hmrc after calling them but surely can't be right . This would make me pay tax earlier if I now go over my limit a little bit which nullifies the interest out surely !!

I think it is highly unlikely you are able to make use of the Personal Savings Allowance.

How much do you expect your your wage (or is it a pension?) to be in 2019:20? The taxable amount which would appear on your P60 in due course.

And is the total taxable interest you expect to receive in the current tax year £60. Or £1,060?

gayn

£60 interest , wages will be around 12500, so my code will reduce from 1250 down to 1190 instead, so i will pay tax earlier:(

Dazed_and_confused

My tax code has been reduced by 15 because of interest earned, so next year i expect around £60 in interest so my tax free allowance will be reduced by 60 because of this. I am very close to my allowance limit each year so this means I will pay tax earlier even though there is a £1000 personal allowance on interest. Not sure how this works with hmrc after calling them but surely can't be right . This would make me pay tax earlier if I now go over my limit a little bit which nullifies the interest out surely !!

£60 interest , wages will be around 12500, so my code will reduce from 1250 down to 1190 instead, so i will pay tax earlier

You have misunderstood your tax code. I think HMRC have included the interest in your tax code in the belief that you will have spare Personal Allowance i.e. your taxable pay will be less than £12,500.

Which means your savings interest is included in the code as it is using up some of your Personal Allowance.

But if you were to update HMRC with both a more upto date estimate of your interest (the £60) and your expected taxable pay, say £13,000 to allow for a pay rise, then you would have no spare Personal Allowance.

That would mean your savings interest would become taxable at the savings starter rate of tax which is 0% in 2019:20.

As there would be no spare Personal Allowance and you would have no tax to pay on your savings interest your tax code would be 1250L and you would only pay tax on your wages if the annualised amount on any given pay day was more than £12,509.

pilotamx

I am trying to understand what to do with tax returns. I've received the tax certificate related to an investment account I have outside ISA which says I had net interest of £850 last year. If I interpret everything correctly, this amount is within the allowance so I do not have to fill any tax return form and/or inform the HMRC. Is that right?

Dazed_and_confused

Have you been sent a tax return or notice to file one?

If not you wouldn't need to notify HMRC as the banks tell them about the interest direct and they will take into account any taxable savings interest and send you a calculation if necessary.

Although probably not common you should be aware that it is possible to have a larger tax bill even if the savings interest is due to be taxed at the savings nil rate (aka Personal Savings Allowance).

pilotamx

No. I've been sent only a 'Consolidated Tax Certificate'. Nothing else.
Apart from this income, I just have my salary as employee under 1185L for last year (1250L now).
Tax certificate highlights income per 'overseas income','unit trust dividends' and loyalty bonus. Loyalty bonus report an income tax of£4.64 already deducted by the bank.

When you say a 'larger tax bill', how can I check it? shuold I eventually receive anything from HRMC about this? Or I might discovered they changed my tax code in the next payslip ?