Personal Savings Allowance 2017/2018 Changes!

Gizmo247

Logged into my Personal Tax Account recently and noticed this in the area for the 2017/2018 tax year about PSA:

From 6 April 2017 Personal Savings Allowance (PSA) will be a zero percent tax band. The PSA introduced from 6 April 2017 will still apply but PSA will not be listed as a tax-free allowance.

basic rate taxpayers will continue to have up to £1000 of tax free savings income
higher rate taxpayers will continue to have up to £500 of tax free savings income
additional rate tax payers are not entitled to PSA

and this about untaxed savings:

Since 6 April 2016 banks and building societies have paid interest without deducting tax. They tell HMRC how much untaxed interest they have paid you. It is treated as income so Income Tax is due. This is included in your total for the year.

The interest you got last year is used to estimate how much you will get this year. Next year’s tax code is adjusted to collect any tax due.

You must tell HMRC if the estimated interest is wrong

My reading into this is, you must estimate your savings interest for 2017/2018 upfront and notify HMRC ASAP. As PSA is no longer an allowance, you will get taxed on your estimated savings (at say 40%) upfront via PAYE (whether you actually receive those savings or not) and then get a rebate following a tax calculation, probably in the following year's tax code.

Am I reading this wrong?

Dazed_and_confused

A little bit (though not necessarily your reading!)

The PSA has always been a 0% rate band and never an actual allowance, there are threads about this on the savings board.

Gov.uk advice was that HMRC would get the info from banks but you probably would be better off keeping things up to date yourself as this could avoid tax debts building up if your tax code wasn't including enough savings interest

polymaff

So HMRC've STILL got it wrong!

At last they recognise that talk of allowances doesn't fit the current Income Tax process - but they STILL haven't understood the difference between "tax free" and taxed at 0%

b***y useless HMRC.

antrobus

Gizmo247 wrote: »

...My reading into this is, you must estimate your savings interest for 2017/2018 upfront and notify HMRC ASAP. As PSA is no longer an allowance, you will get taxed on your estimated savings (at say 40%) upfront via PAYE (whether you actually receive those savings or not) and then get a rebate following a tax calculation, probably in the following year's tax code.

I think it means that HMRC will estimate your 2017/2018 interest income based on your 2016/2017 interest income. Any excess over the PSA will be adjusted in your tax code, and thus taxed via PAYE.

When you complete your SA return for 2017/2018 you will enter the actual amount of interest received, plus everything else you are supposed to report to HMRC. Either you will owe them money, or they will owe you money. It will be dealt with as usual.

polymaff

antrobus wrote: »

I think it means that HMRC will estimate your 2017/2018 interest income based on your 2016/2017 interest income. Any excess over the PSA will be adjusted in your tax code, and thus taxed via PAYE.

When you complete your SA return for 2017/2018 you will enter the actual amount of interest received, plus everything else you are supposed to report to HMRC. Either you will owe them money, or they will owe you money. It will be dealt with as usual.

They're doing this already. It is just an extension of Payments on Account from the rich to the rest of the tax-paying population.

Just like income tax itself, then higher rates of tax..

FOREVER21

Gizmo247 wrote: »

Logged into my Personal Tax Account recently and noticed this in the area for the 2017/2018 tax year about PSA:

and this about untaxed savings:

My reading into this is, you must estimate your savings interest for 2017/2018 upfront and notify HMRC ASAP. As PSA is no longer an allowance, you will get taxed on your estimated savings (at say 40%) upfront via PAYE (whether you actually receive those savings or not) and then get a rebate following a tax calculation, probably in the following year's tax code.

Am I reading this wrong?

I was wondering about this as looking at my personal tax account the £1k tax free interest was shown as an allowance, for 2016/17 whereas for 2017/18 it shows n/a .

My interest for the current year will be under the threshold, but for next year due to a five year bond maturing it will exceed the £1k.

As HMRC get details of of all interest paid, I presume they will adjust my PAYE to claw back the excess. I could I suppose try and amend my estimated interest from n/a to an actual amount via my personal tax account but not sure if this will work.

I think I will just wait as HMRC do state that people getting over the " allowance " do not need to do anything.

Gizmo247

antrobus wrote: »

I think it means that HMRC will estimate your 2017/2018 interest income based on your 2016/2017 interest income. Any excess over the PSA will be adjusted in your tax code, and thus taxed via PAYE.

When you complete your SA return for 2017/2018 you will enter the actual amount of interest received, plus everything else you are supposed to report to HMRC. Either you will owe them money, or they will owe you money. It will be dealt with as usual.

Ah, I see. Having it as an allowance just would not work when the financial institutions start directly reporting untaxed income. So PSA will have no effect on your tax-free allowance and will only appear in your tax code if your estimate is more than your PSA boundary. That makes more sense. It is a pity the HMRC info about PSA has not been updated to reflect this, just an off-the-cuff paragraph.

polymaff

Gizmo247 wrote: »

Ah, I see. Having it as an allowance just would not work when the financial institutions start directly reporting untaxed income. So PSA will have no effect on your tax-free allowance and will only appear in your tax code if your estimate is more than your PSA boundary. That makes more sense. It is a pity the HMRC info about PSA has not been updated to reflect this, just an off-the-cuff paragraph.

No. It has nothing to do with the financial institutions or how they pay you, or how they report you - or your other comments. What HMRC are belatedly attempting - and failing - to do is to stumble toward a recognition that the way the tax system now works is:

First, total all of your taxable income, then allocate allowances - or whatever you want to call them - to that pile of taxable income. Then tax the remainder.

This is not the order in which HMRC, or accountants, have assessed tax in the past. It came as a shock to accountants - and it looks like the penny is still in the act of dropping with HMRC - that they had/need to re-jig their understanding.

For MSEers the new mechanism was set down in a posting last April 1st. That multi-thanked posting, written before FY16/17 started, is still valid - and needs very little updating (just the parameters) to apply to FY17/18.

http://forums.moneysavingexpert.com/showpost.php?p=70422918&postcount=9

jedi44

I don't understand why this £1,000 should only appear if my interest exceeds that amount. My interest shown for next year is £400. This has been deducted from my personal allowance and therefore I will be taxed on it. Why? It is not over the £1,000 and I am well within the basic rate. Am I missing something here?

notbritishgas

jedi44 wrote: »

I don't understand why this £1,000 should only appear if my interest exceeds that amount. My interest shown for next year is £400. This has been deducted from my personal allowance and therefore I will be taxed on it. Why? It is not over the £1,000 and I am well within the basic rate. Am I missing something here?

They estimate that your interest for next year will be £1400.

polymaff

jedi44 wrote: »

I don't understand why this £1,000 should only appear if my interest exceeds that amount. My interest shown for next year is £400. This has been deducted from my personal allowance and therefore I will be taxed on it. Why? It is not over the £1,000 and I am well within the basic rate. Am I missing something here?

Like I said earlier, you are one of the many little people being sucked into making Payments on Account (PoA). Currently, you can object to this and HMRC will put you back on the previous basis of settling by the following January 31st. I wonder how long that will still be possible?

As far back as last June - I brought this matter to HMRC's attention - were they really going to let everyone settle their Taxable Savings Income liability by the following January 31st or were they going to extend PoA?. They replied that they would make their intentions known later in the year. They did, in fact, release an obscure document later in 2016. Part of it claimed to be the results of opinion research they'd conducted. This research, apparently, revealed that many taxpayers would welcome the opportunity to settle their tax liabilities - including potential future liabilites - at the earliest possible date.

Welcome to the post-truth world of HMRC.