Personal Savings Allowance guide

ircE

eskbanker said:

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....

Hi @eskbanker, the highlighted section implies that letting HMRC take it back from PAYE the following tax-year is a no-brainer. Is this always the case? Just wondering as I'm on course to owe a small sum (~£20) in interest tax for this tax year (24/25) and it feels like a no-brainer to me to just pay the lump sum and not let them fiddle around with my 26/27 allowance for the sake of simplicity.

eskbanker

ircE said:

eskbanker said:

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....

Hi @eskbanker, the highlighted section implies that letting HMRC take it back from PAYE the following tax-year is a no-brainer. Is this always the case? Just wondering as I'm on course to owe a small sum (~£20) in interest tax for this tax year (24/25) and it feels like a no-brainer to me to just pay the lump sum and not let them fiddle around with my 26/27 allowance for the sake of simplicity.

You're certainly not alone in preferring that HMRC don't adjust tax codes but in strictly financial terms it'll make sense to have HMRC collect via later PAYE deductions instead of an upfront lump sum, as the taxpayer retains the money for longer, but the benefit will be negligible for small sums.

taxman1234

taxman1234 said:

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.

Just upped my pension estimate a wee bit on the higher side via Government Gateway...code has also gone back up again....hopefully that cncels out the tax payment.

Dazed_and_C0nfused

taxman1234 said:

taxman1234 said:

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.

Just upped my pension estimate a wee bit on the higher side via Government Gateway...code has also gone back up again....hopefully that cncels out the tax payment.

If the code number, with a 9 inserted at the end, is equal to or greater than the the pension paid then there is no reason for tax to be deducted.

For example if your code was 555L the pension payer would give tax code allowance of 5559 by the end of the tax year.

So only if your pension was 5560 or more would there be tax to pay.

taxman1234

Dazed_and_C0nfused said:

taxman1234 said:

taxman1234 said:

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.

Just upped my pension estimate a wee bit on the higher side via Government Gateway...code has also gone back up again....hopefully that cncels out the tax payment.

If the code number, with a 9 inserted at the end, is equal to or greater than the the pension paid then there is no reason for tax to be deducted.

For example if your code was 555L the pension payer would give tax code allowance of 5559 by the end of the tax year.

So only if your pension was 5560 or more would there be tax to pay.

Just checked my next pension payment.....all (tiny) tax taken over last 2 months has been refunded.
Thanks again to everyone who has replied to me on here.....great forum

Dazed_and_C0nfused

taxman1234 said:

Dazed_and_C0nfused said:

taxman1234 said:

taxman1234 said:

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.

Just upped my pension estimate a wee bit on the higher side via Government Gateway...code has also gone back up again....hopefully that cncels out the tax payment.

If the code number, with a 9 inserted at the end, is equal to or greater than the the pension paid then there is no reason for tax to be deducted.

For example if your code was 555L the pension payer would give tax code allowance of 5559 by the end of the tax year.

So only if your pension was 5560 or more would there be tax to pay.

Just checked my next pension payment.....all (tiny) tax taken over last 2 months has been refunded.
Thanks again to everyone who has replied to me on here.....great forum

Good to get an update 🙂

mdbofcmrkbmieb

Hello MSE gang - I haven't been able to get any clarity on the subject of PSA and interest paid vs earned (so apologies if this subject has been already addressed)

Essentially is interest paid on borrowing deductible/offset against interest earned on savings accounts?

Thank you in advance!

Dazed_and_C0nfused

mdbofcmrkbmieb said:

Hello MSE gang - I haven't been able to get any clarity on the subject of PSA and interest paid vs earned (so apologies if this subject has been already addressed)

Essentially is interest paid on borrowing deductible/offset against interest earned on savings accounts?

Thank you in advance!

Almost certainly no.  But what does the borrowing relate to?

mdbofcmrkbmieb

Personal loans.

So eg: one pays 20% pa on a loan from Bank X. Pays loan off (early). Decides to save at 5% with Bank X. All within a financial year. Interest paid on 20% loan outweighs interest earned on 5% savings account. 

I pay tax on the savings (Assuming interest is above the PSA)? 

Dazed_and_C0nfused

mdbofcmrkbmieb said:

Personal loans.

So eg: one pays 20% pa on a loan from Bank X. Pays loan off (early). Decides to save at 5% with Bank X. All within a financial year. Interest paid on 20% loan outweighs interest earned on 5% savings account. 

I pay tax on the savings (Assuming interest is above the PSA)? 

No, interest paid on a normal bank loan is not relevant.

And in some more unusual situations your tax liability can increase even when interest is all taxed at 0% 😳

HICBC, tapered Personal Allowance, Married Couple's Allowance and (idc) Winter Fuel Allowance could all be things where interest taxed at 0% could add to your liability