Personal Savings Allowance guide

ColdIron

daeargwr said:

For instant access accounts how do they determine when you can access the interest. Assume it's when that interest is paid?

I'm about to close a savings account I opened in November 2023, annual interest account. If I close this week will the interest be attributed to my PSA for 24/25 or does some get apportioned back to 23/24?

You received no interest 2023/24

When you close the account all the accrued interest will be paid 2024/25

Nothing is apportioned back

taxman1234

Sorry...a wee question 
Small £5.5k private pension....and with savings interest of roughly £10k so I assume I will never pay any tax.
However tax code has been reduced on my private pension so that I'm actually paying a tiny amount of tax.
If I'm correct this is the way HMRC do it and later in the year they will check ,see that I WASN'T meant to pay that tax and refund me?
If so how can I stop them doing this for the 25/26 year as they have the same tax code for this year?
Thanks 

zagfles

taxman1234 said:

Sorry...a wee question 
Small £5.5k private pension....and with savings interest of roughly £10k so I assume I will never pay any tax.
However tax code has been reduced on my private pension so that I'm actually paying a tiny amount of tax.
If I'm correct this is the way HMRC do it and later in the year they will check ,see that I WASN'T meant to pay that tax and refund me?
If so how can I stop them doing this for the 25/26 year as they have the same tax code for this year?
Thanks 

Go onto your tax account and give an estimate of your pension income. Give the most it could possibly be, eg if you're due an inflation increase allow for that. Then the tax code should cover your pension. 

Either that or write to your MP to complain about the ridiculous way HMRC implement tax codes. 

Dazed_and_C0nfused

taxman1234 said:

Sorry...a wee question 
Small £5.5k private pension....and with savings interest of roughly £10k so I assume I will never pay any tax.
However tax code has been reduced on my private pension so that I'm actually paying a tiny amount of tax.
If I'm correct this is the way HMRC do it and later in the year they will check ,see that I WASN'T meant to pay that tax and refund me?
If so how can I stop them doing this for the 25/26 year as they have the same tax code for this year?
Thanks 

That will be because HMRC's estimate of your pension is slightly understated.  Possibly not factoring in your annual inflation increase?

If you have unused tax code allowances then the interest uses those.

If you update your estimated pension on your Personal Tax Account to what you know it will be by 5 April 2025 (or a touch more to be on the safe side) then your tax code will be automatically recalculated and if your expected pension is say £5,555 then you should have a tax code of at least 555L.  

And any tax already deducted will be repaid in March by the pension (as part of your regular pension payment).

You can also now update the 2025-26 pension amount as well, you just need to try and work out what your P60 in April 2026 is likely to show.

taxman1234

Thanks the both of you.
Bear with an old dinosaur....so if I slightly overegg my pension amount this will actually give me a "better" or in this case "more accurate" tax take..........ie no tax at all ?
I thought that would be the opposite.
I have to mention that I transferred part of this year's allowance to my working wife since I thought the HMRC wouldn't tax me.
On top of this would you be shocked to hear it's actually a HMRC pension
Because of this could I really up the estimate since it's a HMRC pension ?

Dazed_and_C0nfused

taxman1234 said:

Thanks the both of you.
Bear with an old dinosaur....so if I slightly overegg my pension amount this will actually give me a "better" or in this case "more accurate" tax take..........ie no tax at all ?
I thought that would be the opposite.
I have to mention that I transferred part of this year's allowance to my working wife since I thought the HMRC wouldn't tax me.
On top of this would you be shocked to hear it's actually a HMRC pension
Because of this could I really up the estimate since it's a HMRC pension ?

Your tax code looks at what allowances are needed for the pension, say £5,400.  If you have interest then that uses the spare allowances giving you (if you have enough interest) a tax code of 540N

If your pension is actually going to be say £5,555 then you don't have as many spare allowances so your tax code is changed to 555N

If your pension was say £15k then there would be no spare allowance for the interest and the tax code would be 1131N (less any deduction needed to collect tax due on the interest.  If any was due).

zagfles

taxman1234 said:

Thanks the both of you.
Bear with an old dinosaur....so if I slightly overegg my pension amount this will actually give me a "better" or in this case "more accurate" tax take..........ie no tax at all ?
I thought that would be the opposite.
I have to mention that I transferred part of this year's allowance to my working wife since I thought the HMRC wouldn't tax me.
On top of this would you be shocked to hear it's actually a HMRC pension
Because of this could I really up the estimate since it's a HMRC pension ?

When do you get the inflation increase? I think public sector pensions tend to get inflation rises in April, so you should know now or soon exactly what your pension is going to be, so should be able to use an exact figure. 

taxman1234

Yep....1.7% increase in April.....might just up it a wee bit more than that to cancel out any albeit small taxation.
Many thanks for all your help folks...appreciate it.

Tantalus86

Quick question. In past tax years i've occasionally gone over the £500 PSA limit and HMRC have adjusted my tax code to claim back the tax that I owe (I'm PAYE). This year however I'm on course to smash the PSA limit (think i'll owe around £600 in tax). 
What's the best way to approach this? Just wait for HMRC to adjust my tax code again or is there an easy method to pay a lump sum?

eskbanker

Tantalus86 said:

Quick question. In past tax years i've occasionally gone over the £500 PSA limit and HMRC have adjusted my tax code to claim back the tax that I owe (I'm PAYE). This year however I'm on course to smash the PSA limit (think i'll owe around £600 in tax). 
What's the best way to approach this? Just wait for HMRC to adjust my tax code again or is there an easy method to pay a lump sum?

Assuming you don't self-assess, they'll issue a statement late in 2025 confirming the tax liability, and the default option will be for them to collect the tax due by adjusting your PAYE code in 2026/27.  If you feel the need to decline an interest-free loan from HMRC, you should be able to contact them and settle the bill with a lump sum though....