Personal Savings Allowance guide

Dazed_and_confused

The most likely situations where you could owe something are,

If your income is greater than £100k or

you are liable for the High Income Child Benefit Charge or

you get Married Couple's Allowance

pilotamx

Defo less than £100k, not getting any allowance, no children, nothing
Thanks

BigBelly

I have numerous savings/current accounts which paid me about £800 in the tax year 2018-19. But I have earned about £2,000 in peer to peer lending. Am I correct in saying that HMRC know about the £800 but not the £2,000? Do I only need to tell them about the peer to peer interest and not the savings/current account interest? I don't do a tax return so how do I tell them?

Dazed_and_confused

Will you have any tax liability on this interest?

Even if your Personal Allowance has all been used it is possible to have £6,000 interest all taxed at 0%.

BigBelly

Dazed_and_confused wrote: »

Will you have any tax liability on this interest?

I earned about £37K from employment so I presume I have to pay 20% tax on the savings+peer to peer interest over £1000.

Dazed_and_confused

If your taxable income is just the £37k plus £2.8k interest then the interest would be taxed

£1,000 x 0%
£1,800 x 20%

I suspect you might need to inform HMRC of the P2P interest but to ensure you get the correct calculation you should tell them about all the interest.

The tax owed will be normally be collected by adjusting your tax code for the 2020:21 tax year but they will also change your current 2019:20 tax code on the assumption you will receive similar amounts of interest again this year.

So if the amount you expect to receive this tax year will be significantly different to the £2.8k you could also provide a more accurate estimate for the current tax year.

Bumbee61

I have just completed the HMRC Form P55 to claim back tax taken on a pension drawdown which, including other pensions, was within my Personal Tax Allowance One of the questions asked on the form was Untaxed Interest on UK Savings. I declared an amount well below the Personal Savings Allowance of £1,000. However, the amount declared was deducted from my Personal Tax Allowance. Why would this be? I thought the Personal Savings Allowance would have been taken into consideration when assessing this deduction.

Consumerist

Bumbee61 wrote: »

I have just completed the HMRC Form P55 to claim back tax taken on a pension drawdown which, including other pensions, was within my Personal Tax Allowance One of the questions asked on the form was Untaxed Interest on UK Savings. I declared an amount well below the Personal Savings Allowance of £1,000. However, the amount declared was deducted from my Personal Tax Allowance. Why would this be? I thought the Personal Savings Allowance would have been taken into consideration when assessing this deduction.

Your eligibility for PSA will not be known until the end of the tax year when it will be taken into account. In the meantime your estimated savings interest is an estimated income which can be used to work out any refund due from your pension drawdown. You may not get all you are owed till after April.

Dazed_and_confused

The Personal Savings Allowance is actually a 0% tax rate and is only available/relevant if you have used both your Personal Allowance and savings starter rate of tax.

So until your total taxable income is at least £17,500 (£16,250 if you have applied for Marriage Allowance) in the current tax year the PSA is irrelevant.

Are you referring to a tax code? If so it's simply because you have some spare allowances which are being used by the interest.

BobbinMan

Could really do with some advice on the personal savings allowance because it's appearing more complex than I'd thought!
I have savings interest income which is less than £500, I'm also a higher rate tax payer and receive income from employment and dividends. I had assumed the savings interest would be free of tax but I'm now being told that it has an affect and will require me to pay more tax ... this is because apparently the interest earned is added to my total income which pushes more of my dividend income into a higher tax band, taking it from 7.5% to 32.5% tax, effectively taxing me an additional 25% on an amount of dividend the same as the interest earned.
Can anyone confirm this is correct?