Anomaly on Self Assessment Tax Calculation

Tom99

[FONT=Tahoma, sans-serif]I have just filled in an online SA for the 1[/FONT][FONT=Tahoma, sans-serif]st[/FONT][FONT=Tahoma, sans-serif] time in years due to interest and dividends now being paid gross in 2016/2017.

[/FONT] [FONT=Tahoma, sans-serif]In the calculation of tax due, the amount of interest is shown as £393 less that the amount declared on the return. For example interest = £2,393 but only £2,000 shown on the tax calculation for interest.

[/FONT] [FONT=Tahoma, sans-serif]But[/FONT][FONT=Tahoma, sans-serif] also my pension income has increased by £393 in the tax calculation?

[/FONT] [FONT=Tahoma, sans-serif]Since both are taxed at 20% it makes no difference to the tax due but I wondered if anyone else has noticed this anomaly? [/FONT]

polymaff

Tom99 wrote: »

[FONT=Tahoma, sans-serif]I have just filled in an online SA for the 1[/FONT][FONT=Tahoma, sans-serif]st[/FONT][FONT=Tahoma, sans-serif] time in years due to interest and dividends now being paid gross in 2016/2017.

[/FONT] [FONT=Tahoma, sans-serif]In the calculation of tax due, the amount of interest is shown as £393 less that the amount declared on the return. For example interest = £2,393 but only £2,000 shown on the tax calculation for interest.

[/FONT] [FONT=Tahoma, sans-serif]But[/FONT][FONT=Tahoma, sans-serif] also my pension income has increased by £393 in the tax calculation?

[/FONT] [FONT=Tahoma, sans-serif]Since both are taxed at 20% it makes no difference to the tax due but I wondered if anyone else has noticed this anomaly? [/FONT]

There are some problems with HMRC's on-line software - but this doesn't sound like one. You really need to quote the entire calculation - which you might not be prepared to do.

And, incidentally, it might make a difference if savings income were to be taxed as non-savings income.

Dazed_and_confused

You need to tell us which boxes you have made the entries on the return. But do you have some unused personal allowance (NOT personal savings "allowance") which might be available to be used against your savings income?

Tom99

[FONT=Tahoma, sans-serif]The interest of £2,393 is entered in box 2 as “Untaxed UK interest etc” and my pension is entered in box 11 “Pensions”.

[/FONT] [FONT=Tahoma, sans-serif]The pension is well above the tax free allowance, let us say £20,000.

[/FONT] [FONT=Tahoma, sans-serif]At the beginning of the “View Your Calculation” the figures are repeated as correct ie Interest £2,393 and UK Pensions £20,000. But below this in the section headed “How we have worked out your income tax” the pension is increased to £20,393 less £11,000 at 20% and the Savings Interest is reduced to £2,000 of which £1,000 is at 0% and £1,000 at 20%.

[/FONT] [FONT=Tahoma, sans-serif]So the end result is exactly the same as far as the amount of tax due.[/FONT]

Dazed_and_confused

Have to confess I'm struggling to understand why that would have happened given the entries you've made.

It hasn't affected the tax liability in your particular circumstances but I wonder if it would have if you'd been eligible for the savings rate band? Would you then have been charged more 20% tax than was required?

polymaff

I don't think that it is "bug" - just an eccentricity in how the all-new HMRC software works. I've seen even odder cases than yours.

The new software takes a far more rigorous approach to the distribution of Personal Allowances. This is long overdue, HMRC having a duty to allocate the Personal Allowance across the five possible components of your taxable income in a way which minimises the total tax liability.

Unfortunately, the all-new software reports the tax breakdown in a very unfriendly way compared with the previous software. It is therefore WAY more difficult to reverse-engineer what has been done - and why - in the computation of your liability.

And this is meant to be the Age of Tax Simplification. :)