Tax advice for pensioners please

cazbash

My aunt and uncle, both in their 80's have recently asked me to help them with their finances as my uncle is no longer able to do so. Now that tax is no longer deducted from savings interest can anyone please advise if they will need to pay any tax and if so I will need to complete a tax return for them.
Uncles pension income £14150 interest on savings £4000
Aunts pension income £3800 interest on savings £4450

00ec25

aunt - no tax, no need to do a tax return

uncle yes, there will be tax -
Given the size of his pension I assume he is getting a works pension as well as a state pension?
presumably there is tax being deducted under PAYE on his works pension (no tax is ever deducted from a state pension). Look at his payslip and tax code. His personal allowance is 11,850 so he will pay tax on the excess above that, ie he'll be taxed on £2,300 so will pay £460 in income tax.

pension 14,150 - PA 11,850 = 2,300 taxed @ 20 % = £460 tax to pay on pension income

As he is over the state pension age he won't pay NI on this income.

for his savings, it may be easier to just show the calculation - but please understand he does not get the 11,850 personal allowance twice. I am merely showing it this way so you can see how the savings get taxed:

Q: how much is his total income? Answer 14,150 + 4,000 = 18,150
Q how much can he receive and potentially pay no tax? Answer: 11,850 personal allowance + 5,000 starting rate band for savings + £1,000 tax free savings allowance = total 17,850

BUT he earns more than the tax free threshold, so his starting rate for savings is reduced and he will pay tax on some of his savings as follows:
earnings 14,150 - 11850 = 2,300 "excess income"
starting band for savings reduced by excess income 5,000 - 2,300 = 2,700
total tax free savings amount 2,700 + 1,000 = 3,700

taxable savings 4,000 - 3,700 = 300 taxed at 20% = £60 tax to pay on savings income

read:
https://www.moneysavingexpert.com/savings/tax-free-savings/

badmemory

Of course for next year they could move the source of that £300 interest into your aunts name & save even the £60 tax!

molerat

cazbash wrote: »

My aunt and uncle, both in their 80's have recently asked me to help them with their finances as my uncle is no longer able to do so.

Born before April 1935 then Married Couples Allowance otherwise Marriage Allowance ?

csgohan4

You might want to consider a power of attorney which is a more formal way which banks cannot deny you access as long as your acting in his best interests

dori2o

molerat wrote: »

Born before April 1935 then Married Couples Allowance otherwise Marriage Allowance ?

OP, this is a good point that has been made. We're either your Aunt or Uncle born before 6 April 1935?

Does your Uncle have the Married Couples Allowance or Marriage Allowance already in their tax code?


If you/they don't know then you might be able to get access to the Personal Tax Account to check.

As your Aunt has no taxable income, and your Uncle will not pay NI, you will need to register using either a Passport to verify their ID, or by using Gov.Verify if they don't have a Passport.

If your Uncle has tax to pay then you will simply need to write to HMRC providing details of the Interest received. (HMRC should automatically receive the details from the banks but as yet I am yet to see any submitted details on individual accounts).

HMRC will provide a calculation and depending on circumstances will either collect via restriction in the 2019/2020 tax code, or will send a calculation advising any amount due is payable on/before 31/01/2019.

If they need to pay before end of Jan 2019 then they could do this online via the Personal Tax Account (another good reason to sign up).

Per advice already given you will need to discuss with your Aunt/Uncle if it is possible to move some of the investment income into your Aunt's name given she has a significant amount of her allowances and savings relief available. Alternatively it may be possible to move any capital to ISA'S etc which are tax free.

That however has to be a decision made by your Aunt/Uncle.

They may want to seek proper financial advice.

Dazed_and_confused

If one of them is old enough for Married Couple's Allowance to be applicable instead of Marriage Allowance then this means the uncle will have no tax to pay as this is much more generous than Marriage Allowance.

If they are too young for Married Couple's Allowance then the aunt would need to apply for Marriage Allowance and this would entitle the uncle to £238 deduction in his tax bill (it does not entitle him to any extra Personal Allowance).

cazbash

Thank you everyone for your replies they are most helpful, it has seemed quite a minefield! Both of them were born before 1935 so the Married couples allowance will apply and therefore no tax to pay. I have already advised them to transfer as much as they are allowed into ISA accounts and they will continue to do so each year.

madgagoo

Have a look at taxvol.org.uk. They are a charity that offers tax advice to people over 60 with an income of, roughly, less than £20,000.

They give advice to tax payers over the phone or, if appropriate, arrange for someone to meet with them face to face (this can be at home or somewhere like an Age UK office). Effectively getting professional tax advice for free.

Nb: I am a volunteer tax adviser for the charity but receive no remuneration from them.