Personal Savings Allowance 2017/2018 Changes!

bjbyorkshire

FOREVER21 POSTED THE FOLLOWING PARAGRAPH.

"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".

She/he is obviously under the same misapprehension as I was until I asked on here. Her 5 year bond is due to mature and the interest paid over the life of the bond will probably put her over the tax free amount. My problem too.

I asked about this recently on this forum and was told that I should put the annual tax amounts on each tax years form even though I have not drawn it out of the account.

I looked at my paper work for my NS&I pensioner 3 year bonds and it says that I didn't receive interest for the 15/16 tax year. That was the first year that we all held the bonds. I didn't receive interest so I can't put it on that years tax form. Have to wait until after April this year to see if I received any interest on it in the last financial year.

Heck it is confusing.

It seems that a lot of people think that the tax is owed at the end of the bond.

polymaff

bjbyorkshire wrote: »

Heck it is confusing.

Shouldn't be. Just ask the organisation concerned for a statement of the account or view the same online The date the interest is shown as credited to the account defines the tax year in which the interest will be taxed

uknick

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?

What tax code are they giving you for 2017-18?

polymaff

jedi44: Try to think of your PAYE coding notice and your assessment to income tax separately. PSA is purely part of the assessment - that which defines your overall liability to income tax. PAYE coding is purely the mechanism by which HMRC try to get as much out of you as soon as is possible. Your Personal Allowance is an assessment parameter and can only be reduced as part of the assessment process. The only link between the two is that the PAYE coding starts as your Personal Allowance - which may then be reduced by those debts, present and future, that the HMRC deems it should try to get out of you asap.

It all should balance out when an assesssment for the year in question is actually agreed - but in the mean time, well, I won't repeat my PoA comments.

antrobus

polymaff wrote: »

Shouldn't be. Just ask the organisation concerned for a statement of the account or view the same online The date the interest is shown as credited to the account defines the tax year in which the interest will be taxed

It says something slightly different here;
http://www.telegraph.co.uk/money/ask-a-money-expert/when-does-the-interest-on-my-fixed-rate-bond-contribute-to-my-pe/

An HMRC spokesman said: “In general, interest counts towards a saver's PSA when it 'arises' - that is when it is received, or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw.”


Therefore;


For example, if you have a three-year bond that does not allow any access throughout the term, the interest earned will contribute to your PSA at the end of the term. This would be the case regardless of whether it paid interest annually or on maturity.

polymaff

antrobus wrote: »

It says something slightly different here;
.....

And something quite different here:

"Natalie Miller, president of the Association of Tax Technicians, says: 'The new system could create confusion and many underpayments of tax.'Savers with bank and building society bonds could also find themselves in the same position.
How you are affected depends on the terms and conditions on your account. Some, like NS&I, add it each year. But with others, no interest is credited to your account until the end of the term.
If you have a bond that runs for two or more years and does not add any interest to your bond until it matures, you won't have to pay any tax until then.
But HMRC will assume all the interest is earned in the tax year it matures - and add the whole lot to your income for that tax year. This could push you over your personal savings allowance and trigger a tax bill."


I've also heard HMRC validate both approaches - surprise, surprise.


I think that the actual circumstances will depend upon the original investment terms. If there were any options attached to the yearly interest other than that it is held until the end of the term and the investor chooses one of those other options, then the investor momentarly has control of the interest. Choosing to re-invest would be such an option, I believe.