Personal Savings Allowance guide

CeeMac

From just reading the article 'Personal Savings Allowance' (updated Feb 2016) and from scanning through the queries and answers on this thread it seems unclear to me when and in what manner the tax (over the £1,000 allowance) is payable. The article mentions that an adjustment will be made in the Tax Code. However, interest is not predictable like a pension or salary (is anything guaranteed I know!). For instance not just a variable interest rate but whether the money invested is for a big purchase, such as a house, purchased for instance early in the tax year. It would not seem right to me to have to pay tax all year via the Tax Code and then have to go about claiming a refund at the end of it. The article says nothing about tax returns at the end of the tax year, but there are questions and comments about filling in tax forms. Can anyone clarify whether taxable income from 'savings' can simply be declared at the end of the tax year on a tax return. I haven't filled in a tax return in recent years so don't know if they have changed. It used to be a fairly straight-forward 4 page document. The institutions provide a certificate of interest paid. I would have thought that if they are added up, take away, the allowance, then the remainder is taxable? Or is there something more complicated that I have missed?

colsten

CeeMac wrote: »

From just reading the article 'Personal Savings Allowance' (updated Feb 2016) and from scanning through the queries and answers on this thread it seems unclear to me when and in what manner the tax (over the £1,000 allowance) is payable.

You are right, it is unclear as it has as not been detailed by HMRC how precisely any extra tax will be payable by those who earn more than the allowance.

It might not be very different to how higher rate tax payers have been paying extra tax for years - i.e. you declare your total income after the end of a tax year and pay/receive any under-/over-payments then. Alternatively, the new Personal Tax Account might be used to process it.

HMRC usually assume that any interest and benefits in kind will be the same in the next tax year. This may not be correct, and you have to tell them once you received your tax code notice. https://www.gov.uk/tax-codes/if-you-think-youve-paid-too-much-tax

FOREVER21

My position is that my income is subject to PAYE each year. With any interest being subject to tax.However I expect my interest to exceed , albeit slightly, the new PSA.for 2016/17.

I thought it might be the case that I could inform HMRC of the position and pay the tax due as a one off payment. I would rather do this than have my tax code changed.

From reading earlier posts I am concerned that HMRC may assume that my interest position will be the same for the following tax year as it certainly won't be, as I have plans to spend the money.

That is the reason for hopefully being able to make a one off payment rather than have them change my tax code and the pay too much tax in2017/8 and have to get a refund.

I guess I will just have to wait and see what system HMRC come up with.

Swipe

I just received my coding notice with over £2000 deducted from my allowance as untaxed interest and no explanation as to what it referred to. I phoned hmrc who asked me to estimate my earnings and savings interest for the coming year (nowhere near £2000) and was told that I would be issued a new tax code of 1100L. I have a feeling the £2000 assumption came from declared interest from 4 tax years ago when I was pushed into the higher tax bracket. If hrmc know exactly how much interest has been received from my bank accounts, then why are they making wild assumptions from figures declared 4 years ago?

Doc_N

Swipe wrote: »

I just received my coding notice with over £2000 deducted from my allowance as untaxed interest and no explanation as to what it referred to. I phoned hmrc who asked me to estimate my earnings and savings interest for the coming year (nowhere near £2000) and was told that I would be issued a new tax code of 1100L. I have a feeling the £2000 assumption came from declared interest from 4 tax years ago when I was pushed into the higher tax bracket. If hrmc know exactly how much interest has been received from my bank accounts, then why are they making wild assumptions from figures declared 4 years ago?

The £2000 will, as you suggest, be based on the previously declared interest. Theoretically, HMRC does receive details of bank (and other) interest earned - and many other income sources besides - but its ability to link all the information sources together for an individual taxpayer is, shall we say, distinctly flaky. It relies on individual to make correct declarations, and some of those declarations will be checked for accuracy.

Loudounman

My wife and I have joint account with Santander..As we are both 20% tax payers we enjoy 10% tax reduction(Joint Account) on 3% interest paid monthly from 20K invested. Under the proposed new rules does that mean that I will be able to enjoy a further £400 tax free interest?

Doc_N

Loudounman wrote: »

My wife and I have joint account with Santander..As we are both 20% tax payers we enjoy 10% tax reduction(Joint Account) on 3% interest paid monthly from 20K invested. Under the proposed new rules does that mean that I will be able to enjoy a further £400 tax free interest?

You'll each be able to receive £1000 interest tax-free - and no tax will be deducted from next April.

CeeMac

Thank you very much Colsten, and for the link.

srisport

Doc_N wrote: »

You'll each be able to receive £1000 interest tax-free - and no tax will be deducted from next April.

I am also in a similar position...


Me and my partner have a joint account with Santander with the max 20K inside it.


Does that mean that the interest earned from this account alone will be split between us?

moneyfoolish

srisport wrote: »

I am also in a similar position...


Me and my partner have a joint account with Santander with the max 20K inside it.


Does that mean that the interest earned from this account alone will be split between us?

Yes. The interest on all joint accounts is split 50% to each person.