Starting rate for savings

Birdie6972

I have received the marriage allowance for 2015/2016, so I have personal allowances of 10,600 plus 1,060.

My income is approx 14,000 and I have savings interest of approx 5,000. This means I can make use of the 5,000 starting rate for savings.

In July 2015 I was sent a tax code by HMRC which calculated my tax due by using a figure of 16,660 (10,600+1,060+5,000). This meant I would pay tax on savings interest of 19,000-16,660=2,340.

But, now I've received my 2016 tax calculation from HMRC, and they have used 19,000-15,600=3,400. So now I have to pay tax on an extra 1060.

Which is correct? Is the 5,000 starting rate added to 10,600 or to 11,660? Even HMRC seem a bit confused about this.

If my tax calculation is correct in using 15,600, then it means that the tax code they sent me last July is clearly wrong, and I have been paying too little tax all year, through no fault of my own. Do I have any redress from HMRC? They won't even apologise for their error.

Thanks for any help.

Dazed_and_confused

Birdie6972 wrote: »

I have received the marriage allowance for 2015/2016, so I have personal allowances of 10,600 plus 1,060.

My income is approx 14,000 and I have savings interest of approx 5,000. This means I can make use of the 5,000 starting rate for savings.

In July 2015 I was sent a tax code by HMRC which calculated my tax due by using a figure of 16,660 (10,600+1,060+5,000). This meant I would pay tax on savings interest of 19,000-16,660=2,340.

But, now I've received my 2016 tax calculation from HMRC, and they have used 19,000-15,600=3,400. So now I have to pay tax on an extra 1060.

Which is correct? Is the 5,000 starting rate added to 10,600 or to 11,660? Even HMRC seem a bit confused about this.

If my tax calculation is correct in using 15,600, then it means that the tax code they sent me last July is clearly wrong, and I have been paying too little tax all year, through no fault of my own. Do I have any redress from HMRC? They won't even apologise for their error.

Thanks for any help.

I have a feeling this is nothing to do with the starting rate band ( although I'm not sure that in the circumstances.you describe you will be entitled to 5000 starting rate at 0%, possibly just part of if it if your "income" of 14000 is wages or profits).

Have you filled in a.self assessment return for 2015/16? If so you as the recipient of the marriage allowance of 1060 cannot claim for it when you fill in your tax return but the HMRC adjust things - this all seems a little confusing at the moment but if you search other.MSE.threads there are a few about this and there is av.helpful poster called dori2o(?) who has tried explaining things.

Without more specific about exactly what types.amounts of income you have it isn't possible to be certain about exactly where the problem lies

CLAPTON

Birdie6972 wrote: »

I have received the marriage allowance for 2015/2016, so I have personal allowances of 10,600 plus 1,060.

My income is approx 14,000 and I have savings interest of approx 5,000. This means I can make use of the 5,000 starting rate for savings.

In July 2015 I was sent a tax code by HMRC which calculated my tax due by using a figure of 16,660 (10,600+1,060+5,000). This meant I would pay tax on savings interest of 19,000-16,660=2,340.

But, now I've received my 2016 tax calculation from HMRC, and they have used 19,000-15,600=3,400. So now I have to pay tax on an extra 1060.

Which is correct? Is the 5,000 starting rate added to 10,600 or to 11,660? Even HMRC seem a bit confused about this.

If my tax calculation is correct in using 15,600, then it means that the tax code they sent me last July is clearly wrong, and I have been paying too little tax all year, through no fault of my own. Do I have any redress from HMRC? They won't even apologise for their error.

Thanks for any help.

in what way were you paying too little tax in 2015-16?

all your interest was taxed at 20% (at source) and you now need to reclaim the excess tax

this year all your interest will be received gross

molerat

Birdie6972 wrote: »

Which is correct? Is the 5,000 starting rate added to 10,600 or to 11,660? Even HMRC seem a bit confused about this.

You got it right there. Various.gov pages continually mention

but only if their income (other than interest or other savings income) is less than £15,600 a year.

but others also state you get £5000 on top of "your personal allowance"

Your tax-free Personal Allowance

The standard Personal Allowance is £11,000, which is the amount of income you don’t have to pay tax on.
Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. It’s smaller if your income is over £100,000.

https://www.gov.uk/income-tax-rates/current-rates-and-allowances
So according to that the £5000 sits on top of whatever your tax allowance happens to be. I have never seen "standard" personal allowance mentioned anywhere in relation to this.

Birdie6972

Thanks molerat, I agree that HMRC.gov says your personal allowance MAY be bigger if you claim marriage allowance. A bit vague.

And I cannot find anywhere that says the 5,000 starting rate is added to the BASIC personal allowance, it just says personal allowance.

I submitted my tax return online, and as an earlier poster says, there was nowhere to put anything about the marriage allowance. I had to submit it, then they sent me a "corrected" version. Only I still don't agree with it. Talking to HMRC on the phone is like banging your head against a brick wall. They don't understand how to calculate your tax, all they can do is put figures into a computer and it will spew out an answer. But they don't understand what I'm trying to complain about :-(

I really don't think they are up to speed on the marriage allowance, even though I've had it for a whole year.

By the way, the tax code they have sent me for this year (2017) uses 11,000+1,100+5,000+1,000=18,100. The extra 1,000 is for the tax free savings allowance. But this contradicts the logic used in working out my 2016 tax return. They can't have it both ways, but try explaining it the person on the end of the phone!

xylophone

https://forums.moneysavingexpert.com/discussion/comment/70470142#Comment_70470142

See post 7 and insert your figures for the 2015-16 tax year (link) and 2016-17 tax year.

xylophone

Remembering that your figures will mean that your PA for 2015-16 and 2016-17 will be increased by the MA.

molerat

xylophone wrote: »

Remembering that your figures will mean that your PA for 2015-16 and 2016-17 will be increased by the MA.

But that is where the argument lies and HMRC themselves seem unsure whether it is £11000 or £12100 to use for the £5000 savings starting rate. Several posts on here have said only the standard allowance is used.

sheramber

Birdie6972 wrote: »

Thanks molerat, I agree that HMRC.gov says your personal allowance MAY be bigger if you claim marriage allowance. A bit vague.

And I cannot find anywhere that says the 5,000 starting rate is added to the BASIC personal allowance, it just says personal allowance.

I submitted my tax return online, and as an earlier poster says, there was nowhere to put anything about the marriage allowance. I had to submit it, then they sent me a "corrected" version. Only I still don't agree with it. Talking to HMRC on the phone is like banging your head against a brick wall. They don't understand how to calculate your tax, all they can do is put figures into a computer and it will spew out an answer. But they don't understand what I'm trying to complain about :-(

I really don't think they are up to speed on the marriage allowance, even though I've had it for a whole year.

By the way, the tax code they have sent me for this year (2017) uses 11,000+1,100+5,000+1,000=18,100. The extra 1,000 is for the tax free savings allowance. But this contradicts the logic used in working out my 2016 tax return. They can't have it both ways, but try explaining it the person on the end of the phone!

In what way was your 2016 tax calculation corrected?

As I understand it the calculation is made without the marriage allowance being deducted, hence your calculation of tax due 10160 @20%. = £212

In due course a credit will be aded to your statement for the marriage allowance of £212 which will cancel out the charge shown.

xylophone

What is your tax code for 2016-17?

Birdie6972

Let's see if I can explain by example. My pension income is 14000 and my savings interest is 5000, making a total of 19000.

Example 1: tax return submitted without marriage allowance

Income 14000
Less basic personal allowance of 10600
So tax payable on 3400 @ 20% = 680
Now, I have used up 3400 of the 5000 starting rate, which means I get only 1600 at 0% rate
The remainder of my savings is 3400, taxed at 20% = 680
Making a total tax bill of 1360.
This is the same as taking the total income of 19000 and deducting 15600, leaving 3400 of savings to be taxed at 20%.

Example 2: how HMRC have applied the marriage allowance

Income 14000
Less personal allowances of 10600+1060
So tax payable on 2340 @ 20% = 468
Savings treated exactly the same as example 1
1600 at 0% rate
3400 at 20% = 680
Making a total tax bill of 1148
This is the same as taking the total income of 19000 and deducting 15600, leaving 3400 of savings to be taxed at 20%.

Example 3: my calculation

Income 14000
Less personal allowances of 10600+1060
So tax payable on 2340 @ 20% = 468
I have used up 2340 of the 5000 starting rate, which means I now get 2660 at 0% rate
and 2340 at 20% = 468
Making a total tax bill of 936.
This is the same as taking the total income of 19000 and deducting 16660, leaving 2340 of savings to be taxed at 20%.

Summary

Example 1: tax is 1360
Example 2: tax is 1148
Example 3: tax is 936

Is this clear?