Declaring Tax on Savings

Keep_pedalling

Yorkshire_Traveller wrote: »

Well I phoned HMRC this morning - charming helpful lady. We had a good discussion on how the new system just isn't working and that other callers had said the same! (Why not let the banks continue to deduct interest and then reclaim the tax paid on the £1000, or have a mini on-line self assesment form purely for declaring savings interest?).

I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.

All sorted thanks to everyone for their help and advice.

Either of those solutions would leave a lot of people paying tax on their savings and most of them will be receiving less than their £1000 allowance, and never claiming it back. Even now many people are not aware of this allowance especially amoung the elderly.

YorkshireTraveller

Keep_pedalling wrote: »

Either of those solutions would leave a lot of people paying tax on their savings and most of them will be receiving less than their £1000 allowance, and never claiming it back. Even now many people are not aware of this allowance especially amoung the elderly.

Yes I see your point. I do also think that the Government will be losing out on revenue if people do not declare their savings interest (the HMRC lady agreed with this!). Despite what has been stated (see above) none of the interest of my eight diffferent savings accounts had been declared to HMRC by my savings providers (and one of those is the Government run NS&I). Just shows how unweildy our tax regime is. I guess there's no easy solution.

00ec25

Yorkshire_Traveller wrote: »

Yes I see your point. I do also think that the Government will be losing out on revenue if people do not declare their savings interest (the HMRC lady agreed with this!). Despite what has been stated (see above) none of the interest of my eight diffferent savings accounts had been declared to HMRC by my savings providers (and one of those is the Government run NS&I). Just shows how unweildy our tax regime is. I guess there's no easy solution.

the govt has always been losing revenue from savings

just go back to the introduction of self assessment and see how few higher rate taxpayers within PAYE were made to do tax returns, yet I know of dozens of such high earners who have substantial savings they "we did not realise" we had to pay extra tax on so have never declared them

Dazed_and_confused

I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.


Think something got lost in translation.

Tax owed for 2016:17 (your op refers) would never start to be collected from this year's tax code half way through the tax year.

You need a calculation for last year and the tax owed for 2016:17 would then be collected either through your 2018:19 tax code i.e. from 6 April 2018 to 5 April 2019. Or you could make a payment direct to HMRC.

This years tax code (2017:18) could be adjusted to collect the tax due for this tax year, 2017:18, but not any tax owed for 2016:17.

You may want to clarify with HMRC exactly what they are going to do as something doesn't seem correct based in your update from earlier today.

YorkshireTraveller

Dazed_and_confused wrote: »

I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.


Think something got lost in translation.

Tax owed for 2016:17 (your op refers) would never start to be collected from this year's tax code half way through the tax year.

You need a calculation for last year and the tax owed for 2016:17 would then be collected either through your 2018:19 tax code i.e. from 6 April 2018 to 5 April 2019. Or you could make a payment direct to HMRC.

This years tax code (2017:18) could be adjusted to collect the tax due for this tax year, 2017:18, but not any tax owed for 2016:17.

You may want to clarify with HMRC exactly what they are going to do as something doesn't seem correct based in your update from earlier today.

Yes I see what you say - I guess I didn't pay attention to the year that the tax code would be adjusted for, but as you say it would be for 2018-19 (so my previous statement that it would be for the current tax year was a mistake) as I prefer to pay in a lump sum.

Thanks for all you help, advice and clarification - much appreciated.

Dazed_and_confused

The default position is usually to collect it through your tax code but if they are sending you a calculation for 2016:17 now you will have nearly 6 months to pay it before the 2018:19 tax code kicks in.

If you prefer to keep things neat and tidy you might prefer to pay it by the end of this calendar year so that there is no tax owed to even be included in your 2018:19 tax code (these seem to be issued in January ready for the forthcoming tax year).

YorkshireTraveller

Dazed_and_confused wrote: »

The default position is usually to collect it through your tax code but if they are sending you a calculation for 2016:17 now you will have nearly 6 months to pay it before the 2018:19 tax code kicks in.

If you prefer to keep things neat and tidy you might prefer to pay it by the end of this calendar year so that there is no tax owed to even be included in your 2018:19 tax code (these seem to be issued in January ready for the forthcoming tax year).

Yes - I like things neat and tidy and will pay the bill when it arrives in the next week. Before I retired I did 26 years of Self Assessment and always paid what was due in a lump sum rather than having my tax code changed. It also makes it easier to quickly check that my base tax code is correct.

badmemory

I have been told that I no longer need to file self assessment (this included for the yr 16-17 which I had already done). I queried this with HMRC naturally. I was told that they will get my state pension direct from DWP and my savings interest direct from the banks & any other pension direct from the provider & they will tell me how much I owe. I will, of course, be checking their figures very carefully.

SallySunshine

I told HMRC that my O.H. no longer needs to fill in SA as he had now 2 pensions and rather than claiming savings interest back, he now paid tax through PAYE
They checked this, agreed, and sent a letter to him to that effect.

Still keep a close eye on this though!

chrismac1

This new savings band, plus the dividend band, plus various other daft allowances, arises from a combination of two things:

1. An utterly clueless wally named Gideon George Osborne, plus.
2. A 1 out of 10 tax service.

Given that HMRC would really struggle to organise a pizz up in a brewery, and Osborne well knew this, he should never have messed around with this stuff, it was utter ignorance of how HMRC operates in practice that led to it.

As an example, I have one client who I sent a draft tax return to today with only 3 income sources:

1. PAYE.
2. Savings income of £500 or so.
3. Carer's allowance.

What could be easier, you would think? The Government pays the Carer's allowance, it gets the PAYE submissions every month from the employer. Easy peasy lemon squeezy his tax code will have added all this up and got the answer right.

NOT SO!! £2k liability. On the basis that HMRC are already looking like messing up his current year tax code too, I've advised him to get ready to make a payment on account because I have so little faith in the HMRC database to add 1 plus 1 and get 2.

So £3k to pay by 31 January for someone who would not even be in self-assessment if HMRC could tell its arze from its elbow.

Now for those newbies to the UK tax system reading this, what you should realise is what happens when this stupid database gets its sums wrong like this for 2 or 3 years then suddenly figures out how idiotic it has been.

You get a great big bill, backed up by lots of horrible threats about bankruptcy and debt collectors and so on. Even though it all arose because HMRC declared that 1 plus 1 was minus 1.